Probability and Statistics for Engineering and the Sciences
9th Edition
ISBN: 9781305251809
Author: Jay L. Devore
Publisher: Cengage Learning
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Chapter 1.1, Problem 1E
Give one possible
- a. All daily newspapers published in the United States
- b. All companies listed on the New York Stock Exchange
- c. All students at your college or university
- d. All grade point averages of students at your college or university
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select bmw stock. you can assume the price of the stock
This problem is based on the fundamental option pricing formula for the continuous-time
model developed in class, namely the value at time 0 of an option with maturity T and
payoff F is given by:
We consider the two options below:
Fo=
-rT
= e
Eq[F].
1
A. An option with which you must buy a share of stock at expiration T = 1 for strike
price K = So.
B. An option with which you must buy a share of stock at expiration T = 1 for strike
price K given by
T
K =
T
St dt.
(Note that both options can have negative payoffs.) We use the continuous-time Black-
Scholes model to price these options. Assume that the interest rate on the money market
is r.
(a) Using the fundamental option pricing formula, find the price of option A. (Hint:
use the martingale properties developed in the lectures for the stock price process
in order to calculate the expectations.)
(b) Using the fundamental option pricing formula, find the price of option B.
(c) Assuming the interest rate is very small (r ~0), use Taylor…
Discuss and explain in the picture
Chapter 1 Solutions
Probability and Statistics for Engineering and the Sciences
Ch. 1.1 - Give one possible sample of size 4 from each of...Ch. 1.1 - For each of the following hypothetical...Ch. 1.1 - Consider the population consisting of all...Ch. 1.1 - a. Give three different examples of concrete...Ch. 1.1 - Many universities and colleges have instituted...Ch. 1.1 - The California State University (CSU) system...Ch. 1.1 - A certain city divides naturally into ten district...Ch. 1.1 - The amount of flow through a solenoid valve in an...Ch. 1.1 - In a famous experiment carried out in 1882,...Ch. 1.2 - Consider the strength data for beams given in...
Ch. 1.2 - The accompanying specific gravity values for...Ch. 1.2 - The accompanying summary data on CeO2 particle...Ch. 1.2 - Allowable mechanical properties for structural...Ch. 1.2 - The accompanying data set consists of observations...Ch. 1.2 - Do running limes of American movies differ somehow...Ch. 1.2 - The article cited in Example 1.2 also gave the...Ch. 1.2 - The accompanying data came from a study of...Ch. 1.2 - Every corporation has a governing board of...Ch. 1.2 - The number of contaminating particles on a silicon...Ch. 1.2 - The article Determination of Most Representative...Ch. 1.2 - The article cited in Exercise 20 also gave the...Ch. 1.2 - How does the speed of a runner vary over the...Ch. 1.2 - The article Statistical Modeling of the Time...Ch. 1.2 - The accompanying data set consists of observations...Ch. 1.2 - A transformation of data values by means of some...Ch. 1.2 - The accompanying summary data on CeO2 particle...Ch. 1.2 - The article Study on the Life Distribution of...Ch. 1.2 - The accompanying frequency distribution on...Ch. 1.2 - The following categories for type of physical...Ch. 1.2 - A Pareto diagram is a variation of a histogram for...Ch. 1.2 - The cumulative frequency and cumulative relative...Ch. 1.2 - Fire load (MJ/m2) is the heat energy that could be...Ch. 1.3 - The May 1, 2009, issue of The Montclarian reported...Ch. 1.3 - Exposure to microbial products, especially...Ch. 1.3 - Mercury is a persistent and dispersive...Ch. 1.3 - A sample of 26 offshore oil workers took part in a...Ch. 1.3 - The article Snow Cover and Temperature...Ch. 1.3 - Blood pressure values are often reported to the...Ch. 1.3 - The propagation of fatigue cracks in various...Ch. 1.3 - Compute the sample median. 25% trimmed mean. 10%...Ch. 1.3 - A sample of n = 10 automobiles was selected, and...Ch. 1.3 - a. If a constant c is added to each xi in a...Ch. 1.3 - An experiment to study the lifetime (in hours) for...Ch. 1.4 - Poly(3-hydroxybutyrate) (PHB), a semicrystalline...Ch. 1.4 - The value of Youngs modulus (GPa) was determined...Ch. 1.4 - The article Effects of Short-Term Warming on Low...Ch. 1.4 - Zinfandel is a popular red wine varietal produced...Ch. 1.4 - Exercise 34 presented the following data on...Ch. 1.4 - A study of the relationship between age and...Ch. 1.4 - In 1997 a woman sued a computer keyboard...Ch. 1.4 - The article A Thin-Film Oxygen Uptake Test for the...Ch. 1.4 - The first four deviations from the mean in a...Ch. 1.4 - A mutual fund is a professionally managed...Ch. 1.4 - Grip is applied to produce normal surface forces...Ch. 1.4 - Here is a stem-and-leaf display of the escape time...Ch. 1.4 - The following data on distilled alcohol content...Ch. 1.4 - A sample of 20 glass bottles of a particular type...Ch. 1.4 - A company utilizes two different machines to...Ch. 1.4 - Blood cocaine concentration (mg/L) was determined...Ch. 1.4 - Observations on burst strength (lb/in2) were...Ch. 1.4 - The accompanying comparative boxplot of gasoline...Ch. 1 - Consider the following information on ultimate...Ch. 1 - A sample of 77 individuals working at a particular...Ch. 1 - Fretting is a wear process that results from...Ch. 1 - The accompanying frequency distribution of...Ch. 1 - A deficiency of the (race element selenium in the...Ch. 1 - Aortic stenosis refers to a narrowing of the...Ch. 1 - a. For what value of c is the quantity (xi c)2...Ch. 1 - a. Let a and b be constants and let yi = axi + b...Ch. 1 - Elevated energy consumption during exercise...Ch. 1 - Here is a description from Minitab of the strength...Ch. 1 - Anxiety disorders and symptoms can often be...Ch. 1 - The article Can We Really Walk Straight? (Amer. J....Ch. 1 - The mode of a numerical data set is the value that...Ch. 1 - Specimens of three different types of rope wire...Ch. 1 - The three measures of center introduced in this...Ch. 1 - The authors of the article Predictive Model for...Ch. 1 - Consider a sample x1 , x2,..., xn and suppose that...Ch. 1 - Let xn and sn2 denote the sample mean and variance...Ch. 1 - Lengths of bus routes for any particular transit...Ch. 1 - A study carried out to investigate the...Ch. 1 - Prob. 82SECh. 1 - Prob. 83SECh. 1 - Consider a sample x1, ... , xn with n even. Let xL...
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- Bob and Teresa each collect their own samples to test the same hypothesis. Bob’s p-value turns out to be 0.05, and Teresa’s turns out to be 0.01. Why don’t Bob and Teresa get the same p-values? Who has stronger evidence against the null hypothesis: Bob or Teresa?arrow_forwardReview a classmate's Main Post. 1. State if you agree or disagree with the choices made for additional analysis that can be done beyond the frequency table. 2. Choose a measure of central tendency (mean, median, mode) that you would like to compute with the data beyond the frequency table. Complete either a or b below. a. Explain how that analysis can help you understand the data better. b. If you are currently unable to do that analysis, what do you think you could do to make it possible? If you do not think you can do anything, explain why it is not possible.arrow_forward0|0|0|0 - Consider the time series X₁ and Y₁ = (I – B)² (I – B³)Xt. What transformations were performed on Xt to obtain Yt? seasonal difference of order 2 simple difference of order 5 seasonal difference of order 1 seasonal difference of order 5 simple difference of order 2arrow_forward
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