[R-SIG-Finance] Computing stop probability
rex
rex at nosyntax.net
Wed Nov 25 03:51:07 CET 2015
Ernest Stokely <wizardchef at gmail.com> [2015-11-24 16:28]:
> Maybe a naive question but given the price and SD of an asset, is there a way to calculate the probability of hitting a stop set at X over the next N days? I know making appropriate assumptions, this is a Wiener process but can't find the correct equation.
>
> A) Is there a closed form solution for this?
> B) Is there an R function related to this?
A) NAFAIK.
My solution using iteration is here:
http://www.nosyntax.net/cfwiki/index.php/Probability_of_Touch-lognormal-3
Note that this is not the same as the probability the price is not less than X N days hence.
HTH,
-rex
--
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after losing them in an alley.
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