17. A risk manager would like to simulate the price of a stock using the discretized GBM, whereSt+At = St + µS{At+√Ã£$£€where μ and o denote, respectively, the stock annual mean return and annual volatility. The datasuggest that the weekly mean return on the stock is 0.5% and the weekly volatility is 4%. Assuminga weekly time step of At = 1/52 (in terms of annual units), what is the appropriate estimate of μ?(a) = 26.4%(b) û = 30.16%(c) û = 4.5%(d) û = 17.94%18. Suppose that the price of an asset obeys geometric Brownian motion (GBM) with an annual driftμ = 0.01 and an annual volatility of o= 0.25. If today's price is $100, what is the probability thatthe price two years from now will drop below $80? Hint: Recall that under GBM, the future priceat T, i.e. ST, given today's spot price, St, iswith TT-t and €~=(a) 21.51%(b) 35.48%(c) 51.1%(d) 30.47%ST= St x exp (μx exp [(μ-27 ) XT + √F X 0 Xe]N (0, 1).

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Answered: 17. A risk manager would like to…

Advanced Engineering Mathematics

10th Edition

ISBN:9780470458365

Author:Erwin Kreyszig

Publisher:Erwin Kreyszig

Chapter2: Second-order Linear Odes

Section: Chapter Questions

Problem 1RQ

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11.9. The trend equation fitted to a series of sales data is given by Y = 1600 + 200X 's
Suppose a data set of 200 observations (n = 200) was analyzed using OLS to examine the relationship between CEO salary and various measures of firm performance. The regression results are as follows, with standard errors in parentheses: logy = 5 + 0.2logx₁0.03x₂ +0.002x3 (0.2) (0.04) (0.004) where? (0.009) y = CEO salary in thousands of dollars X₁ = annual firm sales X₂ = percentage of sales lost to competitors X3 = return on stock in percent R² = 0.290 Suppose you want to test the null hypothesis that percentage of sales lost to competitors has no ceteris paribus effect on the salaries of CEOS. For the one-sided alternative hypothesis ß₂ < 0 and 1% rejection rule (i.e., at the 1% level), you would_ the null hypothesis that ß₂ = 0.
For the above model, determine the following: a. Mean Excess Loss Function b. Limited Expected Value Function c. The 75th Percentile
An investigation was carried out to study the relationship between speed (ft/sec) and stride rate (number of steps taken/sec) among female marathon runners. Resulting summary quantities includedn = 11, E(speed) = 205.5, E(speed)2 = 3884.08, E(rate) = 35.15, E(rate)2 = 112.691, and E(speed)(rate) = 660.136. (a) Calculate the equation of the least squares line that you would use to predict stride rate from speed. (Round all numerical values to four decimal places.) (b) Calculate the equation of the least squares line that you would use to predict speed from stride rate. (Round all numerical values to four decimal places.) (c) Calculate the coefficient of determination for the regression of stride rate on speed of part (a) and for the regression of speed on stride rate of part (b). (Round your answers to three decimal places.) for part (a) for part (b)
Suppose that the borrowing rate that your client faces is 9%. Assume that the equity market index has an expected return of 13% and standard deviation of 25%, that rf = 5%. Your fund manages a risky portfolio, with the following details: E(rp) = 11%, p = 15%. What is the largest percentage fee that a client currently lending (y 1)? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 1 decimal place.) y 1
The R-squared of a regression of an asset’s excess returns against a multi-factor asset pricing model indicates the proportion of the asset’s total volatility that is non-systematic. True False
The daily price of orange juice 30-day futures is normally distributed. InMarch through April 2007, the mean was 145.5 cents per pound, and standarddeviation = 25.0 cents per pound.4 Assuming the price is independent from day today, find P (x < 100) on the next day.
Here's a table with average monthly price of a stock from Jan 2021-July 2021. Month Price Jan 29000 Feb 27000 Mar 31000 Apr 30000 May 32000 June 28000 July 29000 Using a 3-period weighted moving average with weights (wt, wt-1, W-2) = (0.6, 0.2, 0.2), the predicted price August is Using an exponential smoothing model with = 0.4, and with the initial predicted price for Jan the same as the observed price for January, the predicted price for August is % Now, let's suppose that we finally observe that the price for August is 30000. The absolute percent error (APE) of your prediction for August is using the weighted moving average method and % using the exponential smoothing model. (Note: Round your answer to the nearest 2 decimal places. For your APE answer for example let's say you get 0.06786 from Excel, then you should type-in 6.79 as your answer here since it is represented as percentage. Do not enter any symbols other than integers and decimal.)
If the expected return on the market is 8% and the risk for your rate is 4%. What is the expected return for a stock with a beta equal to 2.00?
Ef 53.
A popular social media platform has begun offering stock shares to the public. In the past 2 years, the price of the stock has generally increased. An investment specialist gathers data on the stock price over the past 2 years and proposes two models for estimating the growth of the stock, as shown in the scatterplots. Based on the scatterplots, which type of model is most suitable for estimating the stock price? O A power model is suitable because the scatterplot of log(weeks) against log(stock price) shows a curved relationship. O A linear model is suitable because the scatterplot of weeks against log(stock price) shows a strong linear relationship. log(Stock Price) vs. Weeks 2.28 O An exponential model is suitable because the scatterplot of log(weeks) against log(stock price) shows a curved relationship. 2.26 2.24 2.22 22 P2.18 2 16 * 214 212 21 2.08 O An exponential model is suitable because the scatterplot of weeks against log(stock price) shows a strong linear relationship. Mark…

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