Intro Stats, Books a la Carte Edition (5th Edition)

5th Edition

ISBN: 9780134210285

Author: Richard D. De Veaux, Paul Velleman, David E. Bock

Publisher: PEARSON

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2-Proportion Test

In a 2-proportion test, two separate proportions are measured at the same time, and their similarity is evaluated. It is also known as a 2-proportion z-test, and a comparison of two different proportions is done in this method.

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Textbook Question

Chapter 11.4, Problem 2JC

Recall the experiment about gastric freezing, an old method for treating peptic ulcers that you read about in the first Just Checking. Doctors would insert an inflatable bladder down the patient’s esophagus and into the stomach and then pump in a cold liquid. A major insurance company now states that it doesn’t cover this treatment because “double-blind, controlled clinical trials” failed to demonstrate that gastric freezing was effective.

a) What does it mean that the experiment was double-blind?
b) Why would you recommend a placebo control?
c) Suppose that researchers suspected that the effectiveness of the gastric freezing treatment might depend on whether a patient had recently developed the peptic ulcer or had been suffering from the condition for a long time. How might the researchers have designed the experiment?

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Chapter 11.3, Problem 1JC

Chapter 11, Problem 1E

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Problem 3. Pricing a multi-stock option the Margrabe formula The purpose of this problem is to price a swap option in a 2-stock model, similarly as what we did in the example in the lectures. We consider a two-dimensional Brownian motion given by W₁ = (W(¹), W(2)) on a probability space (Q, F,P). Two stock prices are modeled by the following equations: dX = dY₁ = X₁ (rdt+ rdt+0₁dW!) (²)), Y₁ (rdt+dW+0zdW!"), with Xo xo and Yo =yo. This corresponds to the multi-stock model studied in class, but with notation (X+, Y₁) instead of (S(1), S(2)). Given the model above, the measure P is already the risk-neutral measure (Both stocks have rate of return r). We write σ = 0₁+0%. We consider a swap option, which gives you the right, at time T, to exchange one share of X for one share of Y. That is, the option has payoff F=(Yr-XT). (a) We first assume that r = 0 (for questions (a)-(f)). Write an explicit expression for the process Xt. Reminder before proceeding to question (b): Girsanov's theorem…

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Chapter 11 Solutions

Intro Stats, Books a la Carte Edition (5th Edition)

Ch. 11.3 - At one time, a method called gastric freezing was...Ch. 11.4 - Recall the experiment about gastric freezing, an...Ch. 11 - Steroids The 1990s and early 2000s could be...Ch. 11 - Prob. 2E Ch. 11 - Prob. 3E Ch. 11 - Tomatoes You want to compare the tastiness and...Ch. 11 - Tips II For the experiment described in Exercise...Ch. 11 - Prob. 6E Ch. 11 - Prob. 7E Ch. 11 - Prob. 8E

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Solution Summary: The author explains the meaning of 'double blinding' and the use of placebo in an experiment.

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