MML F/COLLEGE MAT F/TRADES - ACCESS CODE
10th Edition
ISBN: 9781323845967
Author: Hobbs
Publisher: PEARSON
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Chapter 10.4, Problem 13E
To determine
The cost of each shirt and each hat.
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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.)
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?
Chapter 10 Solutions
MML F/COLLEGE MAT F/TRADES - ACCESS CODE
Ch. 10.1 - Is the point (−1, 6) on the graph of the equation...Ch. 10.1 - Prob. 1ECh. 10.1 - Prob. 2ECh. 10.1 - Solve the systems of equations by graphing. See...Ch. 10.1 - Prob. 4ECh. 10.1 - Prob. 5ECh. 10.1 - Prob. 6ECh. 10.1 - Prob. 7ECh. 10.1 - Solve the systems of equations by graphing. See...Ch. 10.1 - Prob. 9E
Ch. 10.1 - Prob. 10ECh. 10.1 - Prob. 11ECh. 10.1 - Prob. 12ECh. 10.1 - Prob. 13ECh. 10.1 - Solve the systems of equations by graphing. See...Ch. 10.1 - Prob. 15ECh. 10.1 - Prob. 16ECh. 10.1 - Prob. 17ECh. 10.1 - Prob. 18ECh. 10.1 - Prob. 19ECh. 10.1 - Prob. 20ECh. 10.1 - Solve the systems of equations by graphing. See...Ch. 10.1 - Graph each system of inequalities and shade the...Ch. 10.1 - Prob. 23ECh. 10.1 - Prob. 24ECh. 10.1 - Prob. 25ECh. 10.1 - Prob. 26ECh. 10.1 - Graph each system of inequalities and shade the...Ch. 10.2 - Does 5x − 2y = 8 make a true statement when x = −2...Ch. 10.2 - Prob. 2LCCh. 10.2 - Prob. 1ECh. 10.2 - Prob. 2ECh. 10.2 - Prob. 3ECh. 10.2 - Prob. 4ECh. 10.2 - Prob. 5ECh. 10.2 - Prob. 6ECh. 10.2 - Prob. 7ECh. 10.2 - Solve the systems of equations using the addition...Ch. 10.2 - Prob. 9ECh. 10.2 - Solve the systems of equations using the addition...Ch. 10.2 - Prob. 11ECh. 10.2 - Prob. 12ECh. 10.2 - Prob. 13ECh. 10.2 - Solve the systems of equations using the addition...Ch. 10.2 - Prob. 15ECh. 10.2 - Prob. 16ECh. 10.2 - Prob. 17ECh. 10.2 - Prob. 18ECh. 10.2 - Prob. 19ECh. 10.2 - Solve the systems of equations using the addition...Ch. 10.2 - Prob. 21ECh. 10.2 - Prob. 22ECh. 10.2 - Solve the systems of equations using the addition...Ch. 10.2 - Prob. 24ECh. 10.2 - Prob. 25ECh. 10.2 - Prob. 26ECh. 10.2 - Prob. 27ECh. 10.2 - Prob. 28ECh. 10.2 - Prob. 29ECh. 10.2 - See Example 5.
Ch. 10.3 - Multiply
5(12 − 3y)
Ch. 10.3 - Prob. 2LCCh. 10.3 - Prob. 1ECh. 10.3 - Prob. 2ECh. 10.3 - Prob. 3ECh. 10.3 - Prob. 4ECh. 10.3 - Prob. 5ECh. 10.3 - Prob. 6ECh. 10.3 - Prob. 7ECh. 10.3 - Prob. 8ECh. 10.3 - Prob. 9ECh. 10.3 - Prob. 10ECh. 10.3 - Prob. 11ECh. 10.3 - Prob. 12ECh. 10.3 - Solve the systems of equations using the...Ch. 10.3 - Prob. 14ECh. 10.3 - Prob. 15ECh. 10.3 - Solve the systems of equations using the...Ch. 10.3 - Prob. 17ECh. 10.3 - Solve the systems of equations using the...Ch. 10.3 - Prob. 19ECh. 10.3 - Solve the systems of equations using the...Ch. 10.3 - Prob. 21ECh. 10.4 - Is (3.7, 5.2) a solution for the equation
0.4x =...Ch. 10.4 - Solve the problems using systems of equations with...Ch. 10.4 - Prob. 2ECh. 10.4 - Prob. 3ECh. 10.4 - Prob. 4ECh. 10.4 - BUS A college bookstore received a partial...Ch. 10.4 - Prob. 6ECh. 10.4 - Prob. 7ECh. 10.4 - Prob. 8ECh. 10.4 - A consumer received two 1-yr loans totaling...Ch. 10.4 - Prob. 10ECh. 10.4 - Prob. 11ECh. 10.4 - a private airplane flew 420 mi in 3 h with the...Ch. 10.4 - Prob. 13ECh. 10.4 - Prob. 14ECh. 10.4 - Prob. 15ECh. 10.4 - Prob. 16ECh. 10.4 - a plant nursery purchased holly shrubs that cost...Ch. 10.4 - CON A mortar mix contains five times as much sand...Ch. 10 - Prob. 1RECh. 10 - Prob. 2RECh. 10 - Prob. 3RECh. 10 - Prob. 4RECh. 10 - Prob. 5RECh. 10 - Prob. 6RECh. 10 - Prob. 7RECh. 10 - Prob. 8RECh. 10 - Prob. 9RECh. 10 - Prob. 10RECh. 10 - Prob. 11RECh. 10 - Prob. 12RECh. 10 - Prob. 13RECh. 10 - Prob. 14RECh. 10 - Prob. 15RECh. 10 - Prob. 16RECh. 10 - Prob. 17RECh. 10 - Prob. 18RECh. 10 - Prob. 19RECh. 10 - Prob. 20RECh. 10 - Prob. 21RECh. 10 - Prob. 22RECh. 10 - Prob. 23RECh. 10 - Prob. 24RECh. 10 - Prob. 25RECh. 10 - Prob. 26RECh. 10 - Prob. 27RECh. 10 - Prob. 28RECh. 10 - Prob. 29RECh. 10 - Prob. 30RECh. 10 - Prob. 31RECh. 10 - Prob. 32RECh. 10 - Prob. 33RECh. 10 - Prob. 34RECh. 10 - Prob. 35RECh. 10 - Prob. 36RECh. 10 - Prob. 37RECh. 10 - Prob. 38RECh. 10 - Prob. 39RECh. 10 - Prob. 40RECh. 10 - Prob. 41RECh. 10 - Prob. 42RECh. 10 - Prob. 43RECh. 10 - Prob. 44RECh. 10 - Prob. 45RECh. 10 - Prob. 46RECh. 10 - Prob. 47RECh. 10 - Prob. 48RECh. 10 - Prob. 49RECh. 10 - Prob. 50RECh. 10 - Prob. 51RECh. 10 - Prob. 52RECh. 10 - Prob. 53RECh. 10 - Prob. 54RECh. 10 - Prob. 55RECh. 10 - Prob. 56RECh. 10 - Prob. 57RECh. 10 - Prob. 58RECh. 10 - Prob. 59RECh. 10 - Prob. 60RECh. 10 - Prob. 61RECh. 10 - Prob. 62RECh. 10 - Prob. 63RECh. 10 - Prob. 64RECh. 10 - Prob. 65RECh. 10 - Prob. 66RECh. 10 - Prob. 67RECh. 10 - Prob. 68RECh. 10 - Prob. 69RECh. 10 - Prob. 70RECh. 10 - Prob. 1CACh. 10 - Prob. 2CACh. 10 - Prob. 3CACh. 10 - Prob. 4CACh. 10 - Prob. 5CACh. 10 - Prob. 6CACh. 10 - Prob. 7CACh. 10 - Prob. 8CACh. 10 - Prob. 9CACh. 10 - Prob. 10CACh. 10 - Prob. 1PTCh. 10 - Prob. 2PTCh. 10 - Prob. 3PTCh. 10 - Prob. 4PTCh. 10 - Prob. 5PTCh. 10 - Prob. 6PTCh. 10 - Prob. 7PTCh. 10 - Prob. 8PTCh. 10 - Prob. 9PTCh. 10 - Prob. 10PTCh. 10 - Prob. 11PTCh. 10 - Prob. 12PTCh. 10 - Prob. 13PTCh. 10 - Prob. 14PTCh. 10 - Prob. 15PTCh. 10 - Prob. 16PTCh. 10 - Prob. 17PTCh. 10 - Prob. 18PTCh. 10 - Prob. 19PTCh. 10 - Prob. 20PTCh. 10 - Prob. 21PTCh. 10 - Prob. 22PTCh. 10 - Prob. 23PTCh. 10 - Prob. 24PTCh. 10 - Prob. 25PTCh. 10 - Prob. 1CPTCh. 10 - Prob. 2CPTCh. 10 - Prob. 3CPTCh. 10 - Prob. 4CPTCh. 10 - Prob. 5CPTCh. 10 - Prob. 6CPTCh. 10 - Prob. 7CPTCh. 10 - Prob. 8CPTCh. 10 - Prob. 9CPTCh. 10 - Prob. 10CPTCh. 10 - Prob. 11CPTCh. 10 - Prob. 12CPTCh. 10 - Prob. 13CPTCh. 10 - Prob. 14CPTCh. 10 - Prob. 15CPTCh. 10 - Prob. 16CPTCh. 10 - Prob. 17CPTCh. 10 - Prob. 18CPTCh. 10 - Prob. 19CPTCh. 10 - Prob. 20CPTCh. 10 - Prob. 21CPTCh. 10 - Prob. 22CPTCh. 10 - Prob. 23CPTCh. 10 - Prob. 24CPTCh. 10 - Prob. 25CPTCh. 10 - Prob. 26CPTCh. 10 - Prob. 27CPTCh. 10 - Prob. 28CPTCh. 10 - Prob. 29CPTCh. 10 - Prob. 30CPT
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