Unformatted text preview: , 000 , 000 times. What is the approxi-mate probability of getting more than 501 , 500 heads? Extra Problem 2. Suppose that you own shares of stock in the company Lewser, Inc. Suppose that the current (initial) stock price is $100 per share. Suppose that we regard the daily changes in stock price as independent and identically distributed random variables (a simple additive random walk model). Suppose that the expected daily change is-$0 . 10 or-10 cents per day (as one would expect from a stock with that name). Using units of dollars, suppose that the variance of the daily change is 0 . 25. Suppose that the distribution of the daily change is a gamma distribution. What is the approximate probability that the stock price has not dropped (is at least $100) after 100 days?...
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- Spring '11
- Operations Research, Probability theory, Stochastic process, approximate probability, daily change