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

prove that 2a=b+c, If the roots of the equation (a-b) x 2 + (b-c) x+ (...

If the roots of the equation (a-b) x 2 + (b-c) x+ (c - a)= 0 are equal. Prove that 2a=b+c. Ans:    (a-b) x 2 + (b-c) x+ (c - a) = 0 T.P 2a = b + c B 2 - 4AC = 0

Measures of central tendency-graphical method , Illustration In a soci...

Illustration In a social survey whether the main reason was to establish the intelligence quotient or IQ of resident in a provided area, the given results were acquired as tab

Differential Equation, #i hve two qestion on Differential Equation i need s...

#i hve two qestion on Differential Equation i need solve it..

What is the area of the court in square feet, A racquetball court is 40 ft ...

A racquetball court is 40 ft through 20 ft. What is the area of the court in square feet? The area of a rectangle is length times width. Thus, the area of the racquetball court

Population problem - nonhomogeneous systems, The next kind of problem seems...

The next kind of problem seems as the population problem. Back in the first order modeling section we looked at several population problems. In such problems we noticed a single po

determine that the relation is symmetric and transitive, 1. Let R and S be...

1. Let R and S be relations on a set A. For each statement, conclude whether it is true or false. In each case, provide a proof or a counterexample, whichever applies. (a) If R

Example of implicit differentiation, Example of Implicit differentiation ...

Example of Implicit differentiation So, now it's time to do our first problem where implicit differentiation is required, unlike the first example where we could actually avoid

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