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@ShaneLee
Last active January 2, 2020 17:28
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def get_simulation(data):
# Get the logarithmic returns of the % change of prices from one trading day to the next.
log_returns = np.log(1 + data.pct_change())
# Get the mean of these returns
u = log_returns.mean()
# Get the variance of these returns
var = log_returns.var()
# Get the change in the average value of these values
drift = u - (0.5 * var)
# Get the standard deviation
stdev = log_returns.std()
# How many days are we going to run the stimulation for
t_intervals = DAYS_IN_YEAR * YEARS
# How many simulations of this financial instrument are we going to run?
iterations = 10
# Create the Monte Carlo stimulation of daily percent changes of the financial instruments.
daily_returns = np.exp(drift + stdev * norm.ppf(np.random.rand(t_intervals, iterations)))
# Create an numpy array filled with zeros with the same shape as the daily_returns numpy array.
price_list = np.zeros_like(daily_returns)
# Set the most recent trading day's data as the start prices
price_list[0] = Sdata.iloc[-1]
# For each day in the simulation, compute the price of the stock after multiplying
# the previous's price by the current day's price.
for t in range(1, t_intervals):
price_list[t] = price_list[t - 1] * daily_returns[t]
# Get all the percentage returns for all the simulations for this financial instructment.
asset_returns = price_list[-1] / price_list[0]
# Get and return the geometric mean (because we are dealingn with percentages)
# of all these simulations for this financial instrument.
return gmean(asset_returns)
@DBremen
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DBremen commented Jan 2, 2020

Hi, Shane thanks a lot for sharing. I found two typos:

  • Line 21: Missing definition of S0 price_list[0] = data.iloc[-1]
  • Line 28: Missing open parenthesis: asset_returns = price_list[-1] / (price_list[0])

@ShaneLee
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ShaneLee commented Jan 2, 2020

Hi Dirk,

Thanks for you comments. I'd missed those errors when I was copying and pasting the code to create the gists.

Thanks again

Shane

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