Computing stop probability
Ernest Stokely <wizardchef at gmail.com> [2015-11-24 16:28]:
Maybe a naive question but given the price and SD of an asset, is there a way to calculate the probability of hitting a stop set at X over the next N days? I know making appropriate assumptions, this is a Wiener process but can't find the correct equation. A) Is there a closed form solution for this? B) Is there an R function related to this?
A) NAFAIK. My solution using iteration is here: http://www.nosyntax.net/cfwiki/index.php/Probability_of_Touch-lognormal-3 Note that this is not the same as the probability the price is not less than X N days hence. HTH, -rex -- Classical economists look for their keys under a streetlight after losing them in an alley.