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

Interpretation of the second derivative, Interpretation of the second deriv...

Interpretation of the second derivative : Now that we've discover some higher order derivatives we have to probably talk regarding an interpretation of the second derivative. I

Trigonometry, trigonometric ratios of sum and difference of two angles

trigonometric ratios of sum and difference of two angles

Introduction to the normal distribution, Q. Introduction to the Normal Dist...

Q. Introduction to the Normal Distribution? Ans. The Binomial distribution is a model for what might happen in the future for a discrete random variable. The Normal Distri

Percentages, how to remember the formulas of this topic

how to remember the formulas of this topic

Changing the base of the index, Changing The Base Of The Index For com...

Changing The Base Of The Index For comparison reasons if two series have different base years, this is difficult to compare them directly. In such cases, it is essential to ch

Simpson rule - approximating definite integrals, Simpson's Rule - Approxima...

Simpson's Rule - Approximating Definite Integrals This is the last method we're going to take a look at and in this case we will once again divide up the interval [a, b] int

General rule - probability rule, GENERAL RULE A general rule is to sub...

GENERAL RULE A general rule is to subtract the probabilities with an even number of components inside the parentheses and add those with an odd number of components (one or th

Pythagorean theorem, How do you find the perimeter of an irregular shape us...

How do you find the perimeter of an irregular shape using Pythagorean theorem?

Trignomatry, what is the trignomatry ratio

what is the trignomatry ratio

Two even digits , Find the number of six-digit positive integers that can b...

Find the number of six-digit positive integers that can be formed using the digits 1,2, 3, 4, and 5 (every of which may be repeated) if the number must start with two even digits o

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