Fundamentals of Statistics (5th Edition)
5th Edition
ISBN: 9780134510026
Author: Sullivan
Publisher: PEARSON
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Chapter 11.3, Problem 12AYU
To determine
To construct: The 95% confidence interval for
To interpret: The interval.
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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 11 Solutions
Fundamentals of Statistics (5th Edition)
Ch. 11.1 - A sampling method is _____ when the individuals...Ch. 11.1 - A sampling method is _____ when the individuals...Ch. 11.1 - In Problems 38, determine whether the sampling is...Ch. 11.1 - In Problems 38, determine whether the sampling is...Ch. 11.1 - In Problems 38, determine whether the sampling is...Ch. 11.1 - In Problems 38, determine whether the sampling is...Ch. 11.1 - In Problems 38, determine whether the sampling is...Ch. 11.1 - Prob. 8AYUCh. 11.1 - In Problems 912, conduct each test at the = 0.05...Ch. 11.1 - In Problems 912, conduct each test at the = 0.05...
Ch. 11.1 - In Problems 912, conduct each test at the = 0.05...Ch. 11.1 - In Problems 912, conduct each test at the = 0.05...Ch. 11.1 - In Problems 1316, construct a confidence interval...Ch. 11.1 - Prob. 14AYUCh. 11.1 - In Problems 1316, construct a confidence interval...Ch. 11.1 - In Problems 1316, construct a confidence interval...Ch. 11.1 - NW Prevnar The drug Prevnar is a vaccine meant to...Ch. 11.1 - Prevnar Part 2 In randomized, double-blind...Ch. 11.1 - Prob. 19AYUCh. 11.1 - Views on the Death Penalty The Pew Research Group...Ch. 11.1 - NW Tattoos The Harris Poll conducted a survey in...Ch. 11.1 - Body Mass Index The body mass index (BMI) of an...Ch. 11.1 - Public Cell Phone Conversations Researchers at...Ch. 11.1 - Prob. 24AYUCh. 11.1 - Side Effects In clinical trials of the allergy...Ch. 11.1 - Practical versus Statistical Significance In...Ch. 11.1 - Prob. 27AYUCh. 11.1 - Prob. 28AYUCh. 11.1 - Deficit Reduction In the Sullivan Statistics...Ch. 11.1 - Prob. 30AYUCh. 11.1 - Prob. 31AYUCh. 11.1 - Prob. 32AYUCh. 11.1 - Prob. 33AYUCh. 11.1 - Prob. 34AYUCh. 11.1 - Prob. 35AYUCh. 11.1 - Putting It Together: Salk Vaccine On April 12,...Ch. 11.1 - Why do we use a pooled estimate of the population...Ch. 11.1 - Explain the difference between an independent and...Ch. 11.2 - A researcher wants to show the mean from...Ch. 11.2 - A researcher wants to show the mean from...Ch. 11.2 - In Problems 3 and 4, assume that the differences...Ch. 11.2 - a. Determine di = Xi Yi for each pair of data. b....Ch. 11.2 - Naughty or Nice? An experiment was conducted in...Ch. 11.2 - Caffeine-Enhanced Workout? Since its removal from...Ch. 11.2 - NW Muzzle Velocity The following data represent...Ch. 11.2 - Reaction Time In an experiment conducted online at...Ch. 11.2 - Prob. 9AYUCh. 11.2 - Secchi Disk A Secchi disk is an 8-inch-diameter...Ch. 11.2 - Getting Taller? To test the belief that sons are...Ch. 11.2 - Prob. 12AYUCh. 11.2 - Prob. 13AYUCh. 11.2 - Car Rentals The following data represent the daily...Ch. 11.2 - DUI Simulator To illustrate the effects of driving...Ch. 11.2 - Prob. 16AYUCh. 11.2 - Prob. 17AYUCh. 11.2 - Putting It Together: Glide Testing You are a...Ch. 11.3 - In Problems 16, assume that the populations are...Ch. 11.3 - In Problems 16, assume that the populations are...Ch. 11.3 - In Problems 16, assume that the populations are...Ch. 11.3 - In Problems 16, assume that the populations are...Ch. 11.3 - In Problems 16, assume that the populations are...Ch. 11.3 - In Problems 16, assume that the populations are...Ch. 11.3 - Elapsed Time to Earn a Bachelors Degree A...Ch. 11.3 - Sugary Beverages It has been reported that...Ch. 11.3 - Prob. 9AYUCh. 11.3 - Walking in the Airport, Part II Do business...Ch. 11.3 - Priming Two Dutch researchers conducted a study in...Ch. 11.3 - Prob. 12AYUCh. 11.3 - NW Ramp Metering Ramp metering is a traffic...Ch. 11.3 - Prob. 14AYUCh. 11.3 - Bacteria in Hospital Carpeting Researchers wanted...Ch. 11.3 - Visual versus Textual Learners Researchers wanted...Ch. 11.3 - Prob. 17AYUCh. 11.3 - Prob. 18AYUCh. 11.3 - Prob. 19AYUCh. 11.3 - Prob. 20AYUCh. 11.3 - Prob. 21AYUCh. 11.3 - Prob. 22AYUCh. 11.3 - Putting It Together: Online Homework Professor...Ch. 11.3 - Prob. 24AYUCh. 11.3 - College Skills The Collegiate Learning Assessment...Ch. 11.3 - MythBusters In a MythBusters episode, the question...Ch. 11.3 - Prob. 27AYUCh. 11.4 - Prob. 1AYUCh. 11.4 - Prob. 2AYUCh. 11.4 - Prob. 3AYUCh. 11.4 - Prob. 4AYUCh. 11.4 - Prob. 5AYUCh. 11.4 - The following data represent the measure of a...Ch. 11.4 - Prob. 7AYUCh. 11.4 - TIMS Report and Kumon TIMS is an acronym for the...Ch. 11.4 - Age Difference in Married Couples What is the...Ch. 11.4 - Prob. 10AYUCh. 11.4 - Prob. 11AYUCh. 11.4 - Prob. 12AYUCh. 11.4 - Prob. 13AYUCh. 11.4 - Prob. 14AYUCh. 11.4 - Prob. 15AYUCh. 11.4 - Extramarital Affairs Is there a difference in the...Ch. 11.4 - Multitasking in School In todays wired society,...Ch. 11.4 - Prob. 18AYUCh. 11.4 - Hospital Readmission As of October 1, 2012,...Ch. 11.4 - Behavior and Gender at Work Researchers wanted to...Ch. 11.4 - Prob. 21AYUCh. 11.4 - Prob. 22AYUCh. 11.4 - Prob. 23AYUCh. 11.4 - Prob. 24AYUCh. 11.4 - Prob. 25AYUCh. 11.4 - Prob. 26AYUCh. 11.4 - Prob. 27AYUCh. 11.4 - In Problems 2231, for each study, explain which...Ch. 11.4 - Prob. 29AYUCh. 11.4 - Prob. 30AYUCh. 11.4 - In Problems 2231, for each study, explain which...Ch. 11 - In Problems 1 and 2, determine if the sampling is...Ch. 11 - In Problems 1 and 2, determine if the sampling is...Ch. 11 - In Problem 3, assume that the paired differences...Ch. 11 - In Problems 4 and 5, assume that the populations...Ch. 11 - In Problems 4 and 5, assume that the populations...Ch. 11 - A random sample of n1 = 555 individuals results in...Ch. 11 - Height versus Arm Span A statistics student heard...Ch. 11 - McDonalds versus Wendys A student wanted to...Ch. 11 - Treatment for Osteoporosis Osteoporosis is a...Ch. 11 - Determining Sample Size A nutritionist wants to...Ch. 11 - Height versus Arm Span Construct and interpret a...Ch. 11 - Prob. 12RECh. 11 - Prob. 1CTCh. 11 - Prob. 2CTCh. 11 - Prob. 3CTCh. 11 - Prob. 4CTCh. 11 - Prob. 5CTCh. 11 - Prob. 6CTCh. 11 - Prob. 7CTCh. 11 - In a study conducted to determine the role that...Ch. 11 - Researchers had a car traveling 10 miles per hour...Ch. 11 - Zoloft is a drug used to treat...Ch. 11 - Does hypnotism result in a different success rate...Ch. 11 - A researcher wants to estimate the difference...Ch. 11 - It is commonplace to gain weight after quitting...Ch. 11 - Dr. Penelope Nicholls is interested in exploring a...Ch. 11 - Dr. Penelope Nicholls is interested in exploring a...
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