EXCURSIONS IN MOD.MATH W/ACCESS >BI<
9th Edition
ISBN: 9781323788721
Author: Tannenbaum
Publisher: PEARSON C
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Chapter 11, Problem 53E
To determine
(a)
To find:
The symmetry type of the given border.
To determine
(b)
To find:
The symmetry type of the given border.
To determine
(c)
To find:
The symmetry type of the given border.
To determine
(d)
To find:
The symmetry type of a given border.
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For each month of the year, Taylor collected the average high temperatures in Jackson, Mississippi. He used the data to create the histogram shown. Which set of data did he use to create the histogram?
A
55, 60, 64, 72, 73, 75, 77, 81, 83, 91, 91, 92\ 55,\ 60,\ 64,\ 72,\ 73,\ 75,\ 77,\ 81,\ 83,\ 91,\ 91,\ 92 55, 60, 64, 72, 73, 75, 77, 81, 83, 91, 91, 92
B
55, 57, 60, 65, 70, 71, 78, 79, 85, 86, 88, 91\ 55,\ 57,\ 60,\ 65,\ 70,\ 71,\ 78,\ 79,\ 85,\ 86,\ 88,\ 91 55, 57, 60, 65, 70, 71, 78, 79, 85, 86, 88, 91
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D
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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 11 Solutions
EXCURSIONS IN MOD.MATH W/ACCESS >BI<
Ch. 11 - In Fig.1135_, indicate which point is the image of...Ch. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - In Fig. 11-38, P is the image of P under a...Ch. 11 - In Fig.11-39, l is the axis of reflection. a.Find...Ch. 11 - In Fig. 11-40, l is the axis of reflection. a....Ch. 11 - Prob. 7ECh. 11 - In Fig 11-42, P is the image of P under a...Ch. 11 - In Fig. 11-43, P is image of P under a reflection....Ch. 11 - Prob. 10E
Ch. 11 - In Fig. 11-45, A and B are fixed points of a...Ch. 11 - Prob. 12ECh. 11 - In Fig. 11-47, indicate which point is a. the...Ch. 11 - Prob. 14ECh. 11 - In each case, give an answer between 0 and 360. 1....Ch. 11 - Prob. 16ECh. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 21ECh. 11 - Prob. 22ECh. 11 - In Fig. 11-54, indicate which point is the image...Ch. 11 - Prob. 24ECh. 11 - Prob. 25ECh. 11 - In Fig. 11-57, Q is the image of Q under a...Ch. 11 - In Fig. 11-58, D is the image of D under a...Ch. 11 - Prob. 28ECh. 11 - Prob. 29ECh. 11 - Prob. 30ECh. 11 - Prob. 31ECh. 11 - In Fig 11-63, P is the image of P under a glide...Ch. 11 - In Fig.11-64, B is the image of B and D is the...Ch. 11 - Prob. 34ECh. 11 - Prob. 35ECh. 11 - Prob. 36ECh. 11 - In Fig 11-68, D is the image of D and C is the...Ch. 11 - In Fig11-69, A is the image of A and D is the...Ch. 11 - Prob. 39ECh. 11 - Prob. 40ECh. 11 - Prob. 41ECh. 11 - Prob. 42ECh. 11 - Prob. 43ECh. 11 - Prob. 44ECh. 11 - Prob. 45ECh. 11 - Prob. 46ECh. 11 - Find the symmetry type for each of the following...Ch. 11 - Prob. 48ECh. 11 - Prob. 49ECh. 11 - Prob. 50ECh. 11 - Prob. 51ECh. 11 - Prob. 52ECh. 11 - Prob. 53ECh. 11 - Prob. 54ECh. 11 - Prob. 55ECh. 11 - Prob. 56ECh. 11 - Prob. 57ECh. 11 - Prob. 58ECh. 11 - Prob. 59ECh. 11 - Prob. 60ECh. 11 - Prob. 61ECh. 11 - Prob. 62ECh. 11 - Prob. 63ECh. 11 - Prob. 64ECh. 11 - Suppose that a rigid motion M is the product of a...Ch. 11 - Prob. 66ECh. 11 - Prob. 67ECh. 11 - Prob. 68ECh. 11 - Prob. 69ECh. 11 - Prob. 70ECh. 11 - Prob. 71ECh. 11 - Prob. 72ECh. 11 - Prob. 73ECh. 11 - Prob. 74ECh. 11 - Prob. 75ECh. 11 - Prob. 76ECh. 11 - Prob. 77ECh. 11 - Prob. 78ECh. 11 - Prob. 79ECh. 11 - Prob. 80E
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- The Course Name Real Analysis please Solve questions by Real Analysisarrow_forwardWe consider a 4-dimensional stock price model given (under P) by dẴ₁ = µ· Xt dt + йt · ΣdŴt where (W) is an n-dimensional Brownian motion, π = (0.02, 0.01, -0.02, 0.05), 0.2 0 0 0 0.3 0.4 0 0 Σ= -0.1 -4a За 0 0.2 0.4 -0.1 0.2) and a E R. We assume that ☑0 = (1, 1, 1, 1) and that the interest rate on the market is r = 0.02. (a) Give a condition on a that would make stock #3 be the one with largest volatility. (b) Find the diversification coefficient for this portfolio as a function of a. (c) Determine the maximum diversification coefficient d that you could reach by varying the value of a? 2arrow_forwardQuestion 1. Your manager asks you to explain why the Black-Scholes model may be inappro- priate for pricing options in practice. Give one reason that would substantiate this claim? Question 2. We consider stock #1 and stock #2 in the model of Problem 2. Your manager asks you to pick only one of them to invest in based on the model provided. Which one do you choose and why ? Question 3. Let (St) to be an asset modeled by the Black-Scholes SDE. Let Ft be the price at time t of a European put with maturity T and strike price K. Then, the discounted option price process (ert Ft) t20 is a martingale. True or False? (Explain your answer.) Question 4. You are considering pricing an American put option using a Black-Scholes model for the underlying stock. An explicit formula for the price doesn't exist. In just a few words (no more than 2 sentences), explain how you would proceed to price it. Question 5. We model a short rate with a Ho-Lee model drt = ln(1+t) dt +2dWt. Then the interest rate…arrow_forward
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