how to simulate a markov chain?

10 views (last 30 days)
Hilde
Hilde on 16 Oct 2013
Answered: Jonathan LeSage on 16 Oct 2013
we have a geometric random walk for modeling the behavior of the price of a stock over time. state space is 1,02^j with j from -100 to 100. initial price is p(0) = 1. if p(t) = 1,02^100 then p(t+1) = 1,02^99. if p(t) = 1,02^-100, then p(t+1) = 1,02^-99 with probability 0,99, and the price remains unchanged with probability 0,01- our question is: how do we write a code to simulate the process?

Answers (1)

Jonathan LeSage
Jonathan LeSage on 16 Oct 2013
From what I gather from you description, this question has already been answered:

Categories

Find more on Stochastic Differential Equation (SDE) Models in Help Center and File Exchange

Community Treasure Hunt

Find the treasures in MATLAB Central and discover how the community can help you!

Start Hunting!