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

Right angle trigonometry, use the Pythagorean Theorem to find the length of...

use the Pythagorean Theorem to find the length of the missing side. Then find the indicated trigonometric function of the given angle. give an exact answer with a rational denomina

Draw the direction field, Draw the direction field for the subsequent diffe...

Draw the direction field for the subsequent differential equation. Draw the set of integral curves for this differential equation.   Solution:  y′ = y - x  To draw direct

2 step equations, What is a two step equation that equals 8 ?

What is a two step equation that equals 8 ?

Find the median, Marks obtained by 70 students are given below: ...

Marks obtained by 70 students are given below: M arks 20 70 50 60 75 90 40 No.

Methods for doing integral, There are really three various methods for doin...

There are really three various methods for doing such integral. Method 1: This method uses a trig formula as,  ∫sin(x) cos(x) dx = ½ ∫sin(2x) dx = -(1/4) cos(2x) + c

Rational and irrational numbers, RATIONAL NUMBERS All numbers of the ty...

RATIONAL NUMBERS All numbers of the type p/q where p and q are integer and q ≠0, are known as rational. Thus  it can be noticed that every integer is a rational number

Calculus, how to find the volume

how to find the volume

Example of multiplying decimals, Example of Multiplying Decimals: Exa...

Example of Multiplying Decimals: Example:  0.45 x 10 = 4.5.  Same, while multiplying a decimal through 100, 1000, and 10,000, move the decimal point to the right the similar

Strategy -game theory, STRATEGY It refers to a total pattern of cho...

STRATEGY It refers to a total pattern of choices employed by any player. Strategy could be pure or a mixed one In a pure strategy, player X will play one row all of the

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