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I have to make stock changes for the 90 days and professor showed example for 50 days.

I do not know how to do it.

The price of a share of a particular stock listed on the New York Stock Exchange is currently $39. The following probability

A B C D E F G H I J K L M N O P Q R S T price change sum 2 prob 0.05 0.1 0.25 0.15 02 2 0 Start Day # Rand number 10.77180684

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Answer #1

Please understand the process of linking the random number with the probability distribution.

When you generate a random number between 0 and 1, it is uniformly distributed, but if you divide this range of 0 to 1 into 7 buckets where -
1st bucket is of size 0.05 [Start at 0, end at 0.05]
2nd bucket is of size 0.10[Start at 0.05, end at 0.15]
3rd bucket is of size 0.25[Start at 0.15, end at 0.40]
4th bucket is of size 0.20[Start at 0.40, end at 0.60]
5th bucket is of size 0.20[Start at 0.60, end at 0.80]
6th bucket is of size 0.10[Start at 0.80, end at 0.90]
7th bucket is of size 0.10[Start at 0.90, end at 1.00]

You have ultimately transformed your uniform distribution of random numbers to a desired probability distribution given in the question.

Now, for next 90 days generate a random number and check it belongds to which bucket, based on the bucket decide what will be change in the price as given below -

- First I generate random numbers for all 90 days, later on I will copy and paste values only to ensure that my random numbers do not change every time I do some operation in the excel sheet -
H 13/11 Start Day Number Rand Number 39 =RANDO) =RANDO) =RANDO) =RANDO) =RANDO) =RANDO) =RANDO) =RANDO) =RANDO) =RANDO) =RAND

Once, I pasted the "Values", random numbers might have changed once more, but now they should remain constant for the rest of the workings.

D E F G H I J K 39 12 B C Start 2 Day Number Rand Number 0.45393175 0.172826149 0.58336603 0.215478699 | 0.916527158 6 0.3346

Now, look for each random number, in which bucket it lies. Remember this will be a 6-step comparison. You will first check if random number is in first bucket, if yes you will assign it value from first bucket, then you will move on to check for the next bucket. You will keep doing this till last bucket. There are 7 bucket and 6 comparisons will be required, as if some random number is not in first 6 buckets, it will definitely be in 7th bucket, so 7th comparison will not be required. This formula will be very lengthy as described above, but you will need to type it only for the first cell, then it can be simply copied in all other remaining cells -

M N Price Change Prob 0.05 0.1 0.25 0.2 0.2 0.1 Sum =N3 =O3+N4 =04+N5 =O5+N6 =O6+N7 =07+N8 =O8+N9 64 ДА В 1 Start 2 Day Numbe

For simplicity, let me paste the formula for for cell C3 here -
=IF(B3<=$O$3,$M$3,IF(B3<=$O$4,$M$4, IF(B3<=$O$5,$M$5,IF(B3<=$O$6,$M$6, IF(B3<=$O$7,$M$7,IF(B3<=$O$8,$M$8,$M$9))))))

I have shown formula for first 30 dates only, but it will be same in all other cells as well. Finally all the changes thus calculated are added to the initial share price to get the final share price -

F G H Price Change Prob 0.05 0.1 0.25 0.2 Sum =N3 =O3+N4 =O4+N5 =O5+N6 =O6+N7 =07+N8 =O8+N9 0.2 119 Start 2 Day Number Rand N

Final values look like below -
A D E F G H I J KL K M NO 39 0.05 0.15 Price Change Prob -2 -1 | 0 1 2 Sum 0.05 0.1 0.25 0.2 0.2 0.1 64 660 4. 0.1) NNNNMOLO

For random numbers generated by me, final share price is 152, but depending upon random numbers generated by you this final price may be a bit different as well.

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