MATLAB: An Introduction with Applications, 6th Edition: An Introduction with Applications
6th Edition
ISBN: 9781119385134
Author: Amos Gilat
Publisher: WILEY
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Chapter 1, Problem 29P
The number of combinations Cn,r of taking r objects out of n objects is given by:
aye
In the Powerball lottery game the player chooses five numbers from 1 through 59, and then the Powerball number from 1 through 35.
Determine how many combinations are possible by calculating C59,5C35,1. (Use the bulk-in
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Question 1: Determine and interpret the correlation coefficient between the two variables. In your interpretation, discuss the direction of the relationship (positive, negative, or zero relationship). Also discuss the strength of the relationship.
Value of correlation coefficient:
Direction of the relationship (positive, negative, or zero relationship):
Strength of the relationship (strong/moderate/weak):
Question 2: Estimate the relationship between screen size and price using a simple linear regression model and interpret the estimated coefficients. In your interpretation, tell the dollar amount by which price will change for each unit of increase in screen size. (The answer for the…
In this problem, we consider a Brownian motion (W+) t≥0. We consider a stock model (St)t>0
given (under the measure P) by
d.St 0.03 St dt + 0.2 St dwt,
with So 2. We assume that the interest rate is r = 0.06. The purpose of this problem is to
price an option on this stock (which we name cubic put). This option is European-type, with
maturity 3 months (i.e. T = 0.25 years), and payoff given by
F = (8-5)+
(a) Write the Stochastic Differential Equation satisfied by (St) under the risk-neutral measure
Q. (You don't need to prove it, simply give the answer.)
(b) Give the price of a regular European put on (St) with maturity 3 months and strike K = 2.
(c) Let X =
S. Find the Stochastic Differential Equation satisfied by the process (Xt)
under the measure Q.
(d) Find an explicit expression for X₁ = S3 under measure Q.
(e) Using the results above, find the price of the cubic put option mentioned above.
(f) Is the price in (e) the same as in question (b)? (Explain why.)
Chapter 1 Solutions
MATLAB: An Introduction with Applications, 6th Edition: An Introduction with Applications
Ch. 1 - Prob. 1PCh. 1 - Calculate: (a) 8+802.6+e3.53 (b)...Ch. 1 - Calculate: (a) 23+453160.7+log10589006 (b)...Ch. 1 - Calculate: (a) 3.822.754125+5.2+1.853.5 (b)...Ch. 1 - Calculate: (a)sin0.2cos/6+tan72 (b)...Ch. 1 - Define the varialbe z as z = 4.5; than evaluate:...Ch. 1 - Define the variable t as t= 3.2; then evalute: (a)...Ch. 1 - Define the variable xandy as x = 6.5 and y = 3.8;...Ch. 1 - Define the variables a, b, c, and d as: c= 4.6, d...Ch. 1 - Two trigonometric identities are given by: (a)...
Ch. 1 - Two trigonometric identities are given by: (a)...Ch. 1 - Define two variables: alpha =8, and beta = 6....Ch. 1 - Given: x2cosxdx=2xcosx+x22sinx . Use MATLAB to...Ch. 1 - A rectangular box has the dimensions shown. (a)...Ch. 1 - The are length of a segment of a parabola ABC is...Ch. 1 - The three shown circles, with radius 15 in., 10.5...Ch. 1 - A frustum of cone is filled with ice cream such...Ch. 1 - 18. In the triangle shown a =27 in., b 43 in.,...Ch. 1 - For the triangle shown, a = 72°, ß=43°, and its...Ch. 1 - The distance d from a point P (xp,yp,zp) to the...Ch. 1 - The perimeter of an ellipse can be approximated...Ch. 1 - A total of 4217 eggs have w be packed in boxes...Ch. 1 - A total of 777 people have to be transported using...Ch. 1 - Change the display to format long g. Assign the...Ch. 1 - The voltage difference Vabbetween points a and b...Ch. 1 - The current in a series RCL circuit is given by:...Ch. 1 - The monthly payment M of a mortgage P for n years...Ch. 1 - The number of permutations nProf taking r Objects...Ch. 1 - The number of combinations Cn,r of taking r...Ch. 1 - The equivalent resistance of two resistors R1and...Ch. 1 - The output voltage Voutin the circuit shown is...Ch. 1 - Radioactive decay of carbon-14 is used for...Ch. 1 - The greatest common divisor is the largest...Ch. 1 - The amount of energy E (in joules) that is...Ch. 1 - According to the Doppler effect of light, the...Ch. 1 - Newton’s law of cooling gives the temperature T(t)...Ch. 1 - The velocity v and the falling distance d as a...Ch. 1 - Use the Help Window to find a display format that...Ch. 1 - Gosper’s approximation for factorials is given by:...Ch. 1 - According to Newton’s law of universal...
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- Problem 4. Margrabe formula and the Greeks (20 pts) In the homework, we determined the Margrabe formula for the price of an option allowing you to swap an x-stock for a y-stock at time T. For stocks with initial values xo, yo, common volatility σ and correlation p, the formula was given by Fo=yo (d+)-x0Þ(d_), where In (±² Ꭲ d+ õ√T and σ = σ√√√2(1 - p). дго (a) We want to determine a "Greek" for ỡ on the option: find a formula for θα (b) Is дго θα positive or negative? (c) We consider a situation in which the correlation p between the two stocks increases: what can you say about the price Fo? (d) Assume that yo< xo and p = 1. What is the price of the option?arrow_forwardWe consider a 4-dimensional stock price model given (under P) by dẴ₁ = µ· Xt dt + йt · ΣdŴt where (W) is an n-dimensional Brownian motion, π = (0.02, 0.01, -0.02, 0.05), 0.2 0 0 0 0.3 0.4 0 0 Σ= -0.1 -4a За 0 0.2 0.4 -0.1 0.2) and a E R. We assume that ☑0 = (1, 1, 1, 1) and that the interest rate on the market is r = 0.02. (a) Give a condition on a that would make stock #3 be the one with largest volatility. (b) Find the diversification coefficient for this portfolio as a function of a. (c) Determine the maximum diversification coefficient d that you could reach by varying the value of a? 2arrow_forwardQuestion 1. Your manager asks you to explain why the Black-Scholes model may be inappro- priate for pricing options in practice. Give one reason that would substantiate this claim? Question 2. We consider stock #1 and stock #2 in the model of Problem 2. Your manager asks you to pick only one of them to invest in based on the model provided. Which one do you choose and why ? Question 3. Let (St) to be an asset modeled by the Black-Scholes SDE. Let Ft be the price at time t of a European put with maturity T and strike price K. Then, the discounted option price process (ert Ft) t20 is a martingale. True or False? (Explain your answer.) Question 4. You are considering pricing an American put option using a Black-Scholes model for the underlying stock. An explicit formula for the price doesn't exist. In just a few words (no more than 2 sentences), explain how you would proceed to price it. Question 5. We model a short rate with a Ho-Lee model drt = ln(1+t) dt +2dWt. Then the interest rate…arrow_forward
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