Mathematical Modelling in Financial Economics - Economics Assignment Help

Assignment Task

QUESTION

In this question you will need to modify and use the R function simfunction from Example 3.2 in the study book to produce graphs showing the comparison of the results for different values for a and You will need to plot these results in two graphs, by means of R.
(a) To make the comparison between the different curves on the two plots more meaningful, first modify the function simfunction so that it takes a vector of random numbers, rather than generating these itself, afresh, every time it is called. Then, use the same random numbers for all the graphs in the same plot for both parts (b) and (c) a listing of your modified R code in your assignment.
(b) Produce a graph that shows what happens as the value of a is changed by plotting the curves on the same graph, when a is given the values 0.0002, 0.0004, 0.001, and 0.002, while keeping σ at the value of 0.02, the starting share price, s1 at 2 and N = 1000, using 4 curves on the same graph. Give a description of what you observe from the results. Include a copy of your R commands in your answer

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