R Script Simulation.txt

# Discription:
# Function which simulates log returns of a stock price from a t distribution
# 
# Requirements: 
# df = Degrees of Freedom of the t distribution
# 
# Output:
# A data frame with the log prices and the log returns
# 

get.simulation <- function(df, numberofsimulation){
  #initial price
  S0 <- 200
  
  #simulate data from t distribution
  r <- rt(numberofsimulation, df = df)
  
  #calculate the log prices
  logprices <- log(S0) + cumsum(r)
  
  #calculate price of the stock
  prices <- exp(logprices)
  
  #calculate the log returns
  logreturns <- diff(logprices, lag = 1)
  logreturns <- c(0, logreturns)
  
  #convert the data into a data frame
  data <- data.frame(logprices, logreturns)
  
  return(data)
}

#create 1000 simulations with the degree of freedom set to 3
Simulated_data <- get.simulation(3, 1000)