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probabilities for sitting duck

  1. andrewk4

    1,368 posts.
    Hi Sitting Duck,
    Can you please check my maths, something doesn’t look right. Been a while since I did probabilities.

    Assumptions;
    Current spot ncp =11.48
    Q, target spot =12
    V (200day hist Volatility) = .4683
    Time = 2 weeks, = .035yrs

    Probability that ncp will be over 12.00 in 2 weeks is
    P = N (ln(Q/spot)/Vt) , from your previous advice.

    Therefore
    Q/spot = 12/11.48 = 1.0453
    Ln(q/spot) = .0443
    Ln(q/spot)/vt = 2.4595
    N(Ln(q/spot)/vt) = .9930
    Prob of being below is .007

    So the probability would be .993 which seems way too high to me. I tried doing (q/s)/vt before doing ln, but that was worse, and the solution was 1.0 !
    Ive used excels normSdist with mean of 0 and std dev of 1, this is OK?
    I ran the numbers on other stocks, and it is still strange.

    What have I done wrong?

    Once it is all working, I assume that I can use the 20day HV instead of the 200dHV to fine tune it?

    Many thanks for your help. I think this could be very worthwhile.


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