COMPGROUPS.NET | Search | Post Question | Groups | Stream | About | Register

### How to Generate Random Stock Price Paths?

• Follow

Hi.

I'd like to generate 5,000 paths of daily stock prices over a year
(assuming geometric Brownian motion).  I've seen a sample program that
generates random stock prices.  But those are possible prices for one
day.  Since I want price paths over a year, I'd like to know how to
string those daily prices together to create a path.  Has anyone done
this before?  If so, any suggestion or sample code would be much
appreciated.  Thanks.
 0

In essence, you could generate series of random rate of return where you can
define the distribution of such return.  You start off with current price
and tomorrow's price is P(t+1) = P(t) * (1 + randdom).  The next day you do
the same.  I must warn you that the return must have a positive mean or the
price will drift to zero.  Then if you are not careful you will end up with
negative price, which is impossible.

"everton" <bbus505@hotmail.com> wrote in message
> Hi.
>
> I'd like to generate 5,000 paths of daily stock prices over a year
> (assuming geometric Brownian motion).  I've seen a sample program that
> generates random stock prices.  But those are possible prices for one
> day.  Since I want price paths over a year, I'd like to know how to
> string those daily prices together to create a path.  Has anyone done
> this before?  If so, any suggestion or sample code would be much
> appreciated.  Thanks.

 0

1 Replies
367 Views

Similiar Articles:

7/20/2012 12:44:34 PM