IAU Finance Monte Carlo Simulation Report

Description

This is designed to give you a hands-on experience on Monte Carlo Simulation for Financial Analysis. make use of available resources from Internet.

The requirement and guidelines

1- you need to hand-in the excel file, this excel file should include all details of every step you do in the excel … so you need to write the complete procedure within this assignment.

2- You need to select a stock of your choice from Tadawul Stock Exchange or international stock and download daily price data for the last one year and calculate the daily volatility of your stock.. (hint: calculate daily percentage change in closing price and the use the Sample standard deviation formula)…. and then calculate annualized volatility of your stock. (hint: multiply daily volatility by square root of number of trading days in a year)

3- Simulate the price of this stock for the next one month. (hint take the latest price and multiply this by the change factor i.e. (1+norminv(rand(),mean,dailyvolatility)) assuming normal distribution with mean zero and daily volatility you have calculated in the previous step)

4- now take the final value of the month and simulate this for 1000 times using data table function in excel. and calculate the mean, median, standard deviation and 1st, 5th, 10th, 25th, 75th, 90th, 95th and 99th percentile for each simulation.

5- repeat step 4, 100 times

6, draw the graph of the expected trajectory of the stock price.

7, YOU NEED TO WRITE A REPORT ON MONTE CARLO SIMULATION, ITS IMPORTANCE, ITS USES AND HOW TO PERFORM THIS IN EXCEL.

HINT:

https://www.youtube.com/watch?v=IZLFxzwhOkg&ab_channel=OptionTrader

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