Random Walk - Also the probability of either of these...

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Random Variables & Portfolio Analysis Define: a Random Variable is a variable whose numerical value is determined by the outcome of a random experiment It is possible to analyse how a share price can change from one period to the next; using a decision tree. Suppose the price of a share is currently $100 Assume that from one period to the next, the price can go up by 20% or down by 10%
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Unformatted text preview: Also the probability of either of these happening is 0.5. Also assume that the movement of a share price is completely independent of its movement in the past. This is known as a random walk. 207.36 172.8 155.52 144 155.52 129.6 116.64 120 155.52 129.6 116.64 108 116.64 97.2 87.48 100 155.52 129.6 116.64 108 116.64 97.2 87.48 90 116.64 97.2 87.48 81 87.48 72.9 65.61...
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