MATLAB Answers

Charlene
0

For those who love a challenge.

Asked by Charlene
on 8 May 2013

Let St be the price of one share of a particular company at time t. If the price St+1 at time t+1 can either take the value of uSt with probability p1 (where u>1), remain the same with probability p2 or go down to dSt with probability 1-p1-p2 (where 0<d<1), create a Matlab function called ... that simulates {St} from t=0 to t=20 for given u,d,p1 and p2 and plots St against t. Hence, by counting the number of paths; calculate the probability that S6=S0(u^2)(d^3)

using the command RAND

  2 Comments

Do you have a question? I have one: is this your homework assignment? Either way, you need to ask a specific and direct question. Don't leave it up to us to assume/guess what you want.

I have restored the original text of this question.

@Charlene: this question an accepted answer, so it may be valuable to someone else in the future. If you have a good reason why it should be removed from MATLAB Answers, please flag the question, explain why it should be deleted, and an administrator or high-reputation contributor will consider deleting the question. Please do not simply edit your question away.

Products

No products are associated with this question.

1 Answer

Answer by Youssef Khmou
on 8 May 2013
 Accepted answer

hi Charlene , here is an initiation :

u=1.33; 
d=0.75;
p1=0.44;
p2=0.25;
p3=1-p1-p2;
t=0:1:20;
St=zeros(size(t));
St(1)=400; % S(t=0)=S0
 for n=1:length(t)-1
     r=rand(1); % ~(Uniform)
     if r>p3 && r<p2
         St(n+1)=d*St(n);
     elseif r>p2 && r<p1
         St(n+1)=St(n);
     elseif r>p1
         St(n+1)=u*St(n);
     end
 end
 figure, plot(t,St), xlabel('time (DISCRET)'), ylabel(' PRICE in $');

  1 Comment

José-Luis
on 24 May 2013

Please do not post complete answers to homework questions.


Discover MakerZone

MATLAB and Simulink resources for Arduino, LEGO, and Raspberry Pi

Learn more

Discover what MATLAB® can do for your career.

Opportunities for recent engineering grads.

Apply Today

MATLAB Academy

New to MATLAB?

Learn MATLAB today!