Error: Index in position 2 exceeds array bounds (must not exceed 730)

Hi all, Im working on a code that simulates a stock price over two years and then compares it to a strike price (call options). I want to simulate the stock price 3000 times for each starting value (30 to 150), then take the average payout (for that particular staring price) and plot that vs the starting price. The idea is that if the final price is higher than the strike price (starting price) you get a payout equal to the difference between the final and strike price, if not you get 0.

I keep getting an error (Error: Index in position 2 exceeds array bounds (must not exceed 730)) It gives the error in the line

S(k+1, n) = S(k, n) + S(k, n).*r.*dt + sqrt(dt).*sigma.*S(k, n).*eta(k, n);

Here is my code

r = 0.05;
T = 2;
dt = 1/365;
sigma = sqrt(r);
rng('shuffle')
eta = randn(1, 365*T);
n_iterations = 3000;
S = zeros(365*T, n_iterations);
 
for S_0 = 30 : 150
    
    S(1, :) = S_0 ;
    
    n = 1 : n_iterations;
    for k = 1 : 365*T
    S(k+1, n) = S(k, n) + S(k, n).*r.*dt + sqrt(dt).*sigma.*S(k, n).*eta(k, n);
    end
    
    strike = S(1, :);
    price = S((365*T + 1), :);
    
    eurocallreturn(strike, price);
    
    avereturn = mean(eurocallreturn);
    
    hold on
    plot(strike, avereturn)
    xlabel('Price')
    ylabel('Return')
end
 
plot([50:130], exp(0.05*2)*blsprice([50:130], 90, 0.05, 2, sqrt(0.05)))
 
function R = eurocallreturn(strike, price)
if price > strike
    R = price - strike;
    
else if price <= strike
        R = 0;
    end
end
    
end
    

%What am I doing wrong? And how do I get matlab to 
% store all the outputs for avereturn (for each starting value) in a vector?
%Thanks in advance

Answer 1

[Walter Roberson]

T = 2;
eta = randn(1, 365*T);

365*2 = 730, so eta is 1 x 730

n_iterations = 3000;
n = 1 : n_iterations;

so n = 1 : 3000

for k = 1 : 365*T
    S(k+1, n) = S(k, n) + S(k, n).*r.*dt + sqrt(dt).*sigma.*S(k, n).*eta(k, n);
end

eta(k,n) with k = 1 : 365*2 could try to use up to 730 as the first dimension of eta, but eta is only a single row and you never make eta have more rows.

eta(k,n) with n = 1 : 3000 will try to access up to column 3000 in eta, but eta only has 730 columns.