R/monte_carlo_price_paths.R

In barryquinn1/tsfe: Time series financial econometrics

library(tidyverse)
library(purrr)
monte_carlo_paths <- function(days=250,mean=1.001,sd=0.005,S0=40,number_of_possible_futures=1000){

  monte_carlo_sim_fun = function(rep_id_val){
monte_carlo_one_path= 1:days %>% 
  as_tibble() %>% 
  rename(t = value) %>% 
  mutate(
    changes = rnorm(n(),mean=mean,sd=sd), # normal distribution with typical mean change of daily financial returns of  of 1.001 and sd of 0.005
    sample_path= cumprod(c(S0,changes[-1])), # cumulative product of changes with an inital price of S0
    rep_id = rep_id_val)
}
monte_carlo_sims  = 1:number_of_possible_futures %>% 
  map_dfr(monte_carlo_sim_fun) %>%
  rename(possible_path_no=rep_id)

return(monte_carlo_sims)

}