Concept explainers
Simulate five sample trajectories of Eq.
Hint: For the
Equation
where
The five sample trajectories of the equation
Answer to Problem 1P
Solution:
The five sample trajectories for
The five sample trajectories for
For
Explanation of Solution
Given information:
The discrete model for change in the price of a stock over a time interval
The parameter values are
Highly volatile have a large value for
A sequence of numbers
Explanation:
The discrete model for change in the price of a stock over a time interval
Where
The parameter values are
Substitute the above values in the equation (1)
Here,
Thus, equation (1) becomes,
Now, to find the value of
By using the computer technology,
For
Substitute the values in equation (2)
For
Substitute the values in equation (2)
For
Substitute the values in equation (2)
For
Substitute the values in equation (2)
For
Substitute the values in equation (2)
Hence, the graph of trajectories for
Now, for the value
Here,
Thus, equation (1) becomes,
Now, to find the value of
By using computer technology,
For
Substitute the values in equation (3)
For
Substitute the values in equation (3)
For
Substitute the values in equation (3)
For
Substitute the values in equation (2)
For
Substitute the values in equation (3)
The graph of trajectories for
Since the approximation in the graph of trajectories for
Therefore, for
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