30 years: Financial markets trader
In the previous video, Abdulla explained how Monte Carlo is a way of modelling a probability distribution of returns or prices. In this video, Abdulla examines the nature of stock returns to come up with a formula that can be used in Excel to simulate the price paths.
In the previous video, Abdulla explained how Monte Carlo is a way of modelling a probability distribution of returns or prices. In this video, Abdulla examines the nature of stock returns to come up with a formula that can be used in Excel to simulate the price paths.
5 mins 9 secs
Monte Carlo is a way of modelling a probability distribution of returns or prices. In this particular case, changes in stock prices. This can be calculated by multiplying the spot price today by e to the power of a continuously compounded rate of return (r).
Key learning objectives:
Understand how to calculate changes in stock prices
Identify which two components make up rate (r)
Learn the formula we can input in excel for our simulations
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