Estimates the probabilities of price changes, Mathematics

Assignment Help:

Mr. Hoper is in charge of investments for the golden horizon company. He estimates from past price fluctuations in the gold market that the probabilities of price changes on a given day are dependent upon price changes on the previous day. If gold price increases or remains constant, the following distribution represents the probability of price changes in $ per ounce for the day to follow:

Price change ($)               Probability

-4                                             0.05

-2                                             0.10

No change                               0.20

+2                                            0.25

+4                                            0.30

+6                                            0.10

On the other hand, if gold prices reduces on a given day, the next day's distribution of price changes in $ per ounce is:

Price change ($)                          Probability

-6                                                        0.10

-4                                                         0.30

-2                                                         0.25

No change                                           0.15

+2                                                        0.20

Test the policy of buying 100 ounces when prices drop for the preceeding three days and selling 100 ounces when prices rise for the preceding three days.

Simulate for thirty days. Assume at the start that mr. hoper has 1000 ounce of gold for which he has paid $300 per ounce. Determine how much gold will he own at the end of thirty days, as well as his net profit/loss position during this period. Assume at the start that gold is selling at $300 per ounce and that during the day before start of simulation, gold prices rose.


Related Discussions:- Estimates the probabilities of price changes

Reason why we start division, Reasons why we start division : The reason w...

Reasons why we start division : The reason we start division by considering the digit in the leftmost place is efficiency and ease . For instance, suppose we divide 417 by 3, we

Divison, what is 24 diveded by 3

what is 24 diveded by 3

Statistics, How many 4 digit numbers can be formed using the numbers: 1 – 7...

How many 4 digit numbers can be formed using the numbers: 1 – 7. Repeated numbers CAN NOT be used

Probability, Mike sells on the average 15 newspapers per week (Monday – Fri...

Mike sells on the average 15 newspapers per week (Monday – Friday). Find the probability that 2.1 In a given week he will sell all the newspapers

upper and lower limits, A critical dimension of the service quality of a c...

A critical dimension of the service quality of a call center is the wait time of a caller to get to a sales representative. Periodically, random samples of 6 customer calls are mea

Geometry homework, i just have one question i need help on for my geometry ...

i just have one question i need help on for my geometry homework

Show that the height h of the tower, The angle of elevation of the to...

The angle of elevation of the top of a tower from a point on the same level as the foot of the tower is α. On advancing 'p' meters towards the foot of the tower, the angle of eleva

Find the greatest number of 6 digits exactly divisible by 24, Find the grea...

Find the greatest number of 6 digits exactly divisible by 24, 15 and 36. (Ans:999720) Ans: LCM of 24, 15, 36 LCM = 3 × 2 × 2 × 2 × 3 × 5 = 360 Now, the greatest six digit

System of first order equations, Consider the Van der Pol oscillator x′′...

Consider the Van der Pol oscillator x′′- µ(1 - x 2 )x′ + x = 0 (a) Write this equation as a system of first order equations (b) Taking µ = 2, use MatLab's routine ode45 to

Integration, how to learn integration?easier

how to learn integration?easier

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd