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

Alegrabra, how do you do algebra with division

how do you do algebra with division

Evaluate the slope of the tangent line, Evaluate the given limits, showing ...

Evaluate the given limits, showing all working: Using first principles (i.e. the method used in Example 1, Washington 2009, Using definition to find derivative ) find the

Scatter graphs, Scatter Graphs - A scatter graph is a graph that compr...

Scatter Graphs - A scatter graph is a graph that comprises of points which have been plotted but are not joined through line segments - The pattern of the points will defin

Fractions, Andre''s boss asked him to arrange bolts placing the shortest bo...

Andre''s boss asked him to arrange bolts placing the shortest bolt near the front 1 and three fourth inch 1 and 5 eigths 1 and 11 sixteenths which is the shortest

Examples of logarithms, Examples of logarithms: log 2   8 = 3         ...

Examples of logarithms: log 2   8 = 3                                            since    8 = 2 3 log 10   0.01 = -2                                    since    0.01 = 10

Calculate area of a square, The area of a square is given by the formula wi...

The area of a square is given by the formula width time's height. But since the square has all the sides equal, the height is of the same measure as its width. Hence its formula is

What fraction of water flows out, A conical vessel of radius 6cm and height...

A conical vessel of radius 6cm and height 8cm is completely filled with water. A sphere is lowered into the water and its size is such that when it touches the sides, it is just im

Pre-operational stage-development learning maths, Pre-operational Stage : ...

Pre-operational Stage :  This period of a child's cognitive development usually begins at the age of 2, and lasts until about the age of 6. Thus, it usually coincides with the pre

Solid Mensuration, The two sides of a triangle are 17cm and 28cm long, and ...

The two sides of a triangle are 17cm and 28cm long, and the length of the median drawn to the third side is equal to 19.5 cm. What is the distance from an endpoint of the median to

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