Geometric Brownian Motion. The aim of this project is to gain an understanding of the Monte Carlo simulation method (Value-at-Risk measure) and to create a user-friendly piece of software that will allow investors to determine the potential risk a chosen

The first 200 words of this essay...

Name: Tom Forward Year: 2010

Chapter 1: Introduction

A main factor that plays a big part in the price of a stock or shares is the economy, the economy was doing really well up until 2008 when the recession started, this caused share prices to drop dramatically and businesses having to close down. Customers began to spend less, this affected most companies as it caused a downturn in the economy. Investment levels dropped and businesses did not perform to the same standard. Investment became riskier as banks started to collapse, some even going bankrupt causing businesses to close down too. The recession in the past years (which is still ongoing) has led to fewer people investing and share prices decreasing. Due to this risk management has become important when investing.

1.1 Equity

Stocks are also known as equities or shares. An equity is when a stock or share is bought either privately or within a company, this can sometimes be risky because if the company does well in terms of valuation of the equity then the stock or shares bought would have been a good investment to the buyer and profit could be made, but if