wilmott-random-walk-simulation

This project implements a Python simulation of geometric and arithmetic random walks based on an exercise from Paul Wilmott's book 'Paul Wilmott Introduces Quantitative Finance' (2nd Edition), Chapter 1. The exercise explores the behavior of stock prices using a coin-tossing model, as described in the following excerpt: 'One of the simplest random processes is the tossing of a coin. I am going to use ideas related to coin tossing as a model for the behavior of a stock price. As a simple experiment start with the number 100 which you should think of as the price of your stock, and toss a coin. If you throw a head multiply the number by 1.01, if you throw a tail multiply by 0.99. After one toss your number will be either 99 or 101. Toss again. If you get a head multiply your new number by 1.01 or by 0.99 if you throw a tail. You will now have either 1.012 × 100, 1.01 × 0.99 × 100 = 0.99 × 1.01 × 100 or 0.992 × 100. Continue this process and plot your value on a graph each time you throw the coin.' The simulation extends this concept to explore both geometric (multiplicative) and arithmetic (additive) random walks, and examines the effects of varying the probability of price increases.