Statistical Reasoning for Everyday Life (5th Edition)
5th Edition
ISBN: 9780134494043
Author: Jeff Bennett, William L. Briggs, Mario F. Triola
Publisher: PEARSON
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Chapter 10.2, Problem 15E
a.
To determine
Define the null and alternative hypotheses.
b.
To determine
Find the expected frequency for each cell of the table assuming that two variables are independent.
c.
To determine
Compute the value of the
d.
To determine
Compute the critical value of
e.
To determine
Draw the conclusions from the hypothesis test about whether the two variables are independent.
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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
Statistical Reasoning for Everyday Life (5th Edition)
Ch. 10.1 - t Distribution. What is the t distribution? What...Ch. 10.1 - Degrees of Freedom. How do you determine the...Ch. 10.1 - Prob. 3ECh. 10.1 - Hypothesis Test. Briefly summarize the procedure...Ch. 10.1 - Does It Make Sense? For Exercises 58, determine...Ch. 10.1 - Prob. 6ECh. 10.1 - Prob. 7ECh. 10.1 - Prob. 8ECh. 10.1 - Confidence Intervals. In Exercises 918, use the t...Ch. 10.1 - Confidence Intervals. In Exercises 918, use the t...
Ch. 10.1 - Elbow-to-Fingertip Length of Men. A simple random...Ch. 10.1 - Earthquake Epicenter Depths. A simple random...Ch. 10.1 - Hospital Costs with Seat Belts. A study was...Ch. 10.1 - Prob. 14ECh. 10.1 - Estimating Car Pollution. Each car in a sample of...Ch. 10.1 - Movie Lengths. Listed below are lengths (in...Ch. 10.1 - Prob. 17ECh. 10.1 - Prob. 18ECh. 10.1 - Hypothesis Tests. In Exercises 1928, test the...Ch. 10.1 - Prob. 20ECh. 10.1 - Hypothesis Tests. In Exercises 1928, test the...Ch. 10.1 - Prob. 22ECh. 10.1 - Hypothesis Tests. In Exercises 1928, test the...Ch. 10.1 - Hypothesis Tests. In Exercises 1928, test the...Ch. 10.1 - Prob. 25ECh. 10.1 - Prob. 26ECh. 10.1 - Prob. 27ECh. 10.1 - Prob. 28ECh. 10.2 - Two-Way Tables. What is a two-way table? What are...Ch. 10.2 - Hypotheses. When working with two variables in a...Ch. 10.2 - Prob. 3ECh. 10.2 - Prob. 4ECh. 10.2 - Does It Make Sense? For Exercises 58, determine...Ch. 10.2 - Does It Make Sense? For Exercises 58, determine...Ch. 10.2 - Does It Make Sense? For Exercises 58, determine...Ch. 10.2 - Does It Make Sense? For Exercises 58, determine...Ch. 10.2 - Prob. 9ECh. 10.2 - Understanding a Two-Way Table Hypothesis Test....Ch. 10.2 - Survey Results. In Exercises 1114, assume that a...Ch. 10.2 - Survey Results. In Exercises 1114, assume that a...Ch. 10.2 - Survey Results. In Exercises 1114, assume that a...Ch. 10.2 - Survey Results. In Exercises 1114, assume that a...Ch. 10.2 - Prob. 15ECh. 10.2 - Complete Hypothesis Test. In Exercises 1522, carry...Ch. 10.2 - Complete Hypothesis Test. In Exercises 1522, carry...Ch. 10.2 - Complete Hypothesis Test. In Exercises 1522, carry...Ch. 10.2 - Complete Hypothesis Test. In Exercises 1522, carry...Ch. 10.2 - Prob. 20ECh. 10.2 - Prob. 21ECh. 10.2 - Prob. 22ECh. 10.3 - ANOVA. What does ANOVA stand for? What is the...Ch. 10.3 - Prob. 2ECh. 10.3 - Variance in ANOVA. Describe and distinguish...Ch. 10.3 - Test Statistic F. What is the meaning of small and...Ch. 10.3 - Prob. 5ECh. 10.3 - Prob. 6ECh. 10.3 - Does It Make Sense? For Exercises 58, determine...Ch. 10.3 - Does It Make Sense? For Exercises 58, determine...Ch. 10.3 - Prob. 9ECh. 10.3 - Comparing Colleges. A researcher obtains random...Ch. 10.3 - Readability of Authors. Samples of Flesch-Kincaid...Ch. 10.3 - Fabric Flammability Tests in Different...Ch. 10.3 - Prob. 13ECh. 10.3 - Pulse Rates. A random sample of adult females is...Ch. 10.3 - Using Technology. In Exercises 1518, use software...Ch. 10.3 - Using Technology. In Exercises 1518, use software...Ch. 10.3 - Prob. 17ECh. 10.3 - Using Technology. In Exercises 1518, use software...Ch. 10 - In Exercises 13, use the following service times...Ch. 10 - In Exercises 13, use the following service times...Ch. 10 - In Exercises 13, use the following service times...Ch. 10 - Prob. 4CRECh. 10 - Prob. 1CQCh. 10 - As part of the results from the test described in...Ch. 10 - For the hypothesis test described in Exercise 1,...Ch. 10 - A simple random sample of 25 blood platelet counts...Ch. 10 - Prob. 5CQCh. 10 - Prob. 6CQCh. 10 - Prob. 7CQCh. 10 - If the hypothesis test of the claim described in...Ch. 10 - A two-way table, constructed from survey results,...Ch. 10 - Prob. 10CQ
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