Statistics: The Art and Science of Learning from Data (4th Edition)
4th Edition
ISBN: 9780321997838
Author: Alan Agresti, Christine A. Franklin, Bernhard Klingenberg
Publisher: PEARSON
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Chapter 10, Problem 87CP
a.
To determine
Explain how the given information refers to the result of a confidence interval.
b.
To determine
Explain how the given information refers to the result of a significance test.
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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 10 Solutions
Statistics: The Art and Science of Learning from Data (4th Edition)
Ch. 10.1 - Unemployment rate According to the Bureau of Labor...Ch. 10.1 - Prob. 2PBCh. 10.1 - Binge drinking The PACE project at the University...Ch. 10.1 - Smoking and lung obstruction A National Center for...Ch. 10.1 - Do you believe in miracles? Let p1 and p2 denote...Ch. 10.1 - Aspirin and heart attacks in Sweden A Swedish...Ch. 10.1 - Swedish study test Refer to the previous exercise....Ch. 10.1 - Significance test for aspirin and cancer deaths...Ch. 10.1 - Prob. 9PBCh. 10.1 - Comparing marketing commercials Two TV commercials...
Ch. 10.1 - Hormone therapy for menopause The Womens Health...Ch. 10.1 - Obama A/B testing To increase Barack Obamas...Ch. 10.1 - Believe in heaven and hell A recent survey asked...Ch. 10.2 - Alcohol and Energy Drinks A 2013 article in the...Ch. 10.2 - Address global warming You would like to determine...Ch. 10.2 - Housework for women and men Do women tend to spend...Ch. 10.2 - More confident about housework Refer to part c in...Ch. 10.2 - Employment by gender The study described in...Ch. 10.2 - Ideal number of children In 2014, the GSS asked,...Ch. 10.2 - Pay by gender The study described in the Exercise...Ch. 10.2 - Bulimia CI A study of bulimia among college women...Ch. 10.2 - Chelation useless? Chelation is an alternative...Ch. 10.2 - Nicotine dependence A study on nicotine dependence...Ch. 10.2 - Inhaling affect HONC? Refer to the previous...Ch. 10.2 - Females or males more nicotine dependent? Refer to...Ch. 10.2 - Female and male monthly smokers Refer to the...Ch. 10.2 - Body language In an experiment investigating body...Ch. 10.2 - Student survey Refer to the FL Student Survey data...Ch. 10.2 - Study time A graduate teaching assistant for...Ch. 10.2 - More on study time Refer to the data in the...Ch. 10.2 - Time spent on social networks As part of a class...Ch. 10.2 - More time on social networks In the previous...Ch. 10.2 - Normal assumption The methods of this section make...Ch. 10.2 - Vital capacity One of the authors of this book has...Ch. 10.3 - Body dissatisfaction Female college student...Ch. 10.3 - Body dissatisfaction test Refer to the previous...Ch. 10.3 - Surgery versus placebo for knee pain Refer to...Ch. 10.3 - Comparing clinical therapies A clinical...Ch. 10.3 - Clinical therapies 2 Refer to the previous...Ch. 10.3 - Vegetarians more liberal? When a sample of social...Ch. 10.3 - Teeth whitening results One scientific test of...Ch. 10.3 - Permuting therapies Refer to Exercise 10.38, which...Ch. 10.3 - Permutations equally likely Refer to the previous...Ch. 10.3 - Two-sided permutation P-value Refer to the...Ch. 10.3 - Time spent on social networks revisited Exercise...Ch. 10.3 - Compare permutation test to t test Refer to the...Ch. 10.3 - Dominance of politicians For a rating experiment,...Ch. 10.3 - Sampling distribution of x1x2 Refer to Example 12,...Ch. 10.4 - Does exercise help blood pressure? Several recent...Ch. 10.4 - Test for blood pressure Refer to the previous...Ch. 10.4 - Social activities for students As part of her...Ch. 10.4 - More social activities Refer to the previous...Ch. 10.4 - Movies versus parties Refer to the previous two...Ch. 10.4 - Freshman 15 a myth? The freshman 15 is the name of...Ch. 10.4 - Checking for freshman 15 Refer to the previous...Ch. 10.4 - Internet book prices Annas project for her...Ch. 10.4 - Comparing hook prices 2 For the data in the...Ch. 10.4 - Lung capacity revisited Refer to Exercise 10.34...Ch. 10.4 - Comparing speech recognition systems Table 1020 in...Ch. 10.4 - Treat juveniles as adults? The table that follows...Ch. 10.4 - Change coffee brand? A study was conducted to see...Ch. 10.4 - Presidents popularity Last month a random sample...Ch. 10.4 - Heaven and hell Results of polls about belief in...Ch. 10.4 - Heaven and hell around the world Refer to the...Ch. 10.5 - Prob. 65PBCh. 10.5 - Prob. 66PBCh. 10.5 - Basketball paradox The following list summarizes...Ch. 10.5 - Prob. 68PBCh. 10.5 - Prob. 69PBCh. 10.5 - Prob. 70PBCh. 10.5 - Breast cancer over time The percentage of women...Ch. 10 - Pick the method Steve Solomon, the owner of...Ch. 10 - Prob. 73CPCh. 10 - BMI then and now The Centers for Disease Control...Ch. 10 - Marijuana and gender In a survey conducted by...Ch. 10 - Prob. 76CPCh. 10 - Belief depend on gender? Refer to the previous...Ch. 10 - Prob. 78CPCh. 10 - Prob. 79CPCh. 10 - Prob. 80CPCh. 10 - Prob. 81CPCh. 10 - Prob. 82CPCh. 10 - Prob. 83CPCh. 10 - Prob. 84CPCh. 10 - Prob. 85CPCh. 10 - How often do you feel sad? A recent General Social...Ch. 10 - Prob. 87CPCh. 10 - Prob. 88CPCh. 10 - Prob. 89CPCh. 10 - Equal pay in sports? The following data refer to a...Ch. 10 - Prob. 91CPCh. 10 - Prob. 92CPCh. 10 - Anorexia again Refer to Exercise 10.89, comparing...Ch. 10 - Breast-feeding helps IQ? A Danish study of...Ch. 10 - Prob. 95CPCh. 10 - Prob. 96CPCh. 10 - Prob. 97CPCh. 10 - Prob. 98CPCh. 10 - Prob. 99CPCh. 10 - Prob. 100CPCh. 10 - Prob. 101CPCh. 10 - Prob. 102CPCh. 10 - Prob. 103CPCh. 10 - Prob. 104CPCh. 10 - Belief in ghosts and in astrology A poll by Louis...Ch. 10 - Death penalty paradox Exercise 3.58 showed results...Ch. 10 - Prob. 107CPCh. 10 - Prob. 108CPCh. 10 - Prob. 109CPCh. 10 - Prob. 111CPCh. 10 - Pay discrimination against women? A Time Magazine...Ch. 10 - Mean of permutation distribution Refer to Example...Ch. 10 - Treating math anxiety Two new programs were...Ch. 10 - Prob. 115CPCh. 10 - Prob. 116CPCh. 10 - Prob. 117CPCh. 10 - Multiple choice: Sample size and significance If...Ch. 10 - Prob. 119CPCh. 10 - Prob. 120CPCh. 10 - Prob. 121CPCh. 10 - Prob. 122CPCh. 10 - Prob. 123CPCh. 10 - Prob. 124CPCh. 10 - Prob. 125CPCh. 10 - Prob. 126CPCh. 10 - Null standard error for matched pairs Under the...Ch. 10 - Prob. 128CP
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