Tag Archives: simulation

Price Volatility – Basic Brownian Motion

The Situation

You are a consultant who has been hired by a business that sells one commodity product. On December 31st the price is $100 per unit. The business owner wants to know what to expect by the end of January.

Your client gave you the message:

  • Prices are based off the the sales the previous day
  • Roughly 95% of the time, the price will be +/- $10 compared to the day before

With only a few minutes to make the call, how would you decide on what to expect for the end of January? Continue reading