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Python for Finance by Yuxing Yan

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Simulation of stock price movements

We mentioned in the previous sections that in finance, returns are assumed to follow a normal distribution, whereas prices follow a lognormal distribution. The stock price at time t+1 is a function of the stock price at t, mean, standard deviation, and the time interval as shown in the following formula:

Simulation of stock price movements

In this formula, Simulation of stock price movements is the stock price at t+1, Simulation of stock price movements is the expected stock return, is the time interval (), T is the time ...

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