Intro Stats, Books a la carte Plus NEW MyLab Statistics with Pearson eText -- Access Card Package (5th Edition)
Intro Stats, Books a la carte Plus NEW MyLab Statistics with Pearson eText -- Access Card Package (5th Edition)
5th Edition
ISBN: 9780134210247
Author: Richard D. De Veaux, Paul Velleman, David E. Bock
Publisher: PEARSON
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Chapter 1, Problem 38E

(Exercises 27–40) For each description of data, identify the W’s, name the variables, specify for each variable whether its use indicates that it should be treated as categorical or quantitative, and, for any quantitative variable, identify the units in which it was measured (or note that they were not provided).

38. Walking in circles People who get lost in the desert, mountains, or woods often seem to wander in circles rather than walk in straight lines. To see whether people naturally walk in circles in the absence of visual clues, researcher Andrea Axtell tested 32 people on a football field. One at a time, they stood at the center of one goal line, were blindfolded, and then tried to walk to the other goal line. She recorded each individual’s sex, height, handedness, the number of yards each was able to walk before going out of bounds, and whether each wandered off course to the left or the right. No one made it all the way to the far end of the field without crossing one of the sidelines. (Source: STATS No. 39, Winter 2004)

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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

Intro Stats, Books a la carte Plus NEW MyLab Statistics with Pearson eText -- Access Card Package (5th Edition)

Ch. 1 - Prob. 9ECh. 1 - ZIP codes The U.S. Postal Service uses five-digit...Ch. 1 - Voters A February 2010 Gallup Poll question asked,...Ch. 1 - Job hunting A June 2011 Gallup Poll asked...Ch. 1 - Medicine A pharmaceutical company conducts an...Ch. 1 - Stress A medical researcher measures the increase...Ch. 1 - Voting and elections Pollsters are interested in...Ch. 1 - Weather Meteorologists utilize sophisticated...Ch. 1 - (Exercises 1926) For each description of data,...Ch. 1 - (Exercises 1926) For each description of data,...Ch. 1 - (Exercises 1926) For each description of data,...Ch. 1 - (Exercises 1926) For each description of data,...Ch. 1 - (Exercises 1926) For each description of data,...Ch. 1 - (Exercises 1926) For each description of data,...Ch. 1 - (Exercises 1926) For each description of data,...Ch. 1 - (Exercises 1926) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - (Exercises 2740) For each description of data,...Ch. 1 - Kentucky Derby 2016 on the computer Load the...Ch. 1 - Indy 500 2016 on the computer Load the Indy 500...

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