The price of some shares evolves as in therandom walk: SO=100, Slu=105, S1d=95,S2uu=110, S2ud3S2du=D100, S2dd=90, andso on. Every step up is with probabilityp=0.55. We bought 20 shares in period t=0.What is the expected profit selling theseshares in period t=4, under the conditionthat the profit is positive?

Given that the price of some share evolves as in the random walk : S0=100, S1u=105, S1d=95,…

Answered: The price of some shares evolves as in…

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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Person P is walking with his dog every day. He decides to model the time intervals between dog encounters (i.e., how long does it take between two encounters) with the independent random variables Y₁, . . ., Yn . Number of dogs encounters per day, the number of customers entering a store per hour, the number of bacteria per liter of water, etc. are classically modelled using the Poisson distribution. With an exponential distribution, on the other hand, is used for modelling intervals of between events and how long a light bulb lasts, for example. After learning this, person P decides to model the observations in such a way that the corresponding random variables Y1,..., Yn for a random sample, that is, independent observation, of the exponential distribution Exp(1/µ), µ > 0. The parameter µ > 0 is used as the statistical model parameter 1 which is the expected value of each observation random variable Yi. (a) Form the maximum likelihood estimate μ^(y) in the model for the parameter μ…

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