A particular stock goes up each day with probability

Reference no: EM131105957

Suppose you believe that the price of a particular stock goes up each day with probability p and goes down with probability 1- p. You also believe the daily price changes are independent of one another. However, you are not sure of the value of p. Based on your current information, you believe p could be 0.40, 0.45, 0.50, or 0.55, with probabilities 0.15, 0.25, 0.35, and 0.25, respectively. Then you watch the stock price changes for 25 days and observe 12 ups and 13 downs. Use Bayes' rule to find the posterior distribution of p. Based on this posterior distribution, calculate the probability that there will be at least 15 ups in the next 30 price changes

Reference no: EM131105957

Questions Cloud

Differences and similarities between u.s. gaap and i gaap : Briefly describe some of the similarities and differences between U.S. GAAP and i GAAP with respect to the accounting for liabilities.

Company makes a particular decision in the face of uncertain : If your company makes a particular decision in the face of uncertainty, you estimate that it will either gain $10,000, gain $1000, or lose $5000, with probabilities 0.40, 0.30, and 0.30, respectively. You (correctly) calculate the EMV as $2800.

Would you recommend renewing the loan or demand repayment : Similarly, if you were the bank loan officer, would you recommend renewing the loan or demand its repayment?Would your actions be influenced if in early 2009 D'Leon showed you its 2009 projections along with proof that it was going to raise more than..

Develop a risk management plan for a company : Task: You are required to develop a risk management plan for a company of your choice, or for an area of the Registered Training Organisation in which you are studying. Your risk management plan must include: a detailed stakeholder analysis

A particular stock goes up each day with probability : Suppose you believe that the price of a particular stock goes up each day with probability p and goes down with probability 1- p. You also believe the daily price changes are independent of one another. However, you are not sure of the value of p.

Evidence admission and suppression : Evidence that is suppressed because it was gathered in violation of the Constitution may have a profound impact on the guilt of a defendant. However, the ability to limit what information a juror has access to is becoming increasingly more difficu..

The indianapolis colts and the new england patriots : The ending of the game between the Indianapolis Colts and the New England Patriots (NFL teams) in Fall 2009 was quite controversial. With about two minutes left in the game, the Patriots were ahead 34 to 28 and had the ball on their own 28-yard li..

Pricing policy and sales of supermarket own brand : Consider both the direction of shift and the effect on elasticity. Will the elasticity differ markedly at different prices? How will this affect the pricing policy and sales of the supermarket's own brand?

Pcb transformer in a generating station : [Based on Balson et al. (1992).] An electric utility company is trying to decide whether to replace its PCB transformer in a generating station with a new and safer transformer.

User Account

All Pages