Exercise

# A random walk simulation

**Stochastic** or random movements are used in physics to represent particle and fluid movements, in mathematics to describe fractal behavior, and in finance to describe stock market movements.

Use the `np.random.normal()`

function to model random walk movements of the USO oil ETF with a constant daily average return (mu) and average daily volatility (vol) over the course of T trading days.

Instructions

**100 XP**

- Set the number of simulated days (
`T`

) equal to 252, and the initial stock price (`S0`

) equal to 10. - Calculate
`T`

random normal values using`np.random.normal()`

, passing in`mu`

and`vol`

, and`T`

as parameters, then adding 1 to the values and assign it to`rand_rets`

. - Calculate the random walk by multiplying
`rand_rets.cumprod()`

by the initial stock price and assign it to`forecasted_values`

.