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

What is a system of equations?, What is a System of Equations? And its Solu...

What is a System of Equations? And its Solution? Here is an example of a system of equations (also called a simultaneous system of equations) x 2 + y = 3

Find out function is increasing and decreasing, Find out where the followin...

Find out where the following function is increasing & decreasing. A (t ) = 27t 5 - 45t 4 -130t 3 + 150 Solution As with the first problem first we need to take the

Matrices, find inverse of [1 2 3 2 4 5 3 5 6]

find inverse of [1 2 3 2 4 5 3 5 6]

The larger angle 15 find the measure of the smaller angle, Two angles are c...

Two angles are complementary. The larger angle is 15° more than twice the smaller. Find out the measure of the smaller angle. Let x = the number of degrees in the smaller angle

Proof for properties of dot product, Proof for Properties of Dot Product ...

Proof for Properties of Dot Product Proof of u → • (v → + w → ) = u → • v → + u → • w → We'll begin with the three vectors, u → = (u 1 , u 2 , ...

What is his test average, Steve earned a 96 percent on his ?rst math test, ...

Steve earned a 96 percent on his ?rst math test, a 74% on his second test, and an 85 percent on his third test. What is his test average? Add the test grades (96 + 74 + 85 = 25

Probability., an insurance salesman sells policies to 5 men, all of identic...

an insurance salesman sells policies to 5 men, all of identical age in good health. the probability that a man of this particular age will be alive 30 years hence is 2/3.Find the p

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