MyLab Math with Pearson eText -- Access Card -- for Using & Understanding Mathematics with Integrated Review
7th Edition
ISBN: 9780134715865
Author: Jeffrey O. Bennett, William L. Briggs
Publisher: PEARSON
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Chapter 11.B, Problem 27E
To determine
Determine the type of symmetry with regards to the figure mentioned.
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Construct a know-show table for each statement below that appears to be true.
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…
Problem 1. Multi-stock model
We consider a 2-stock model similar to the one studied in class. Namely, we consider
=
S(1)
S(2)
=
S(¹) exp (σ1B(1) + (M1 - 0/1 )
S(²) exp (02B(2) + (H₂-
M2
where (B(¹) ) +20 and (B(2) ) +≥o are two Brownian motions, with
t≥0
Cov (B(¹), B(2)) = p min{t, s}.
"
The purpose of this problem is to prove that there indeed exists a 2-dimensional Brownian
motion (W+)+20 (W(1), W(2))+20 such that
=
S(1)
S(2)
=
=
S(¹) exp (011W(¹) + (μ₁ - 01/1) t)
롱)
S(²) exp (021W (1) + 022W(2) + (112 - 03/01/12) t).
where σ11, 21, 22 are constants to be determined (as functions of σ1, σ2, p).
Hint: The constants will follow the formulas developed in the lectures.
(a) To show existence of (Ŵ+), first write the expression for both W. (¹) and W (2)
functions of (B(1), B(²)).
as
(b) Using the formulas obtained in (a), show that the process (WA) is actually a 2-
dimensional standard Brownian motion (i.e. show that each component is normal,
with mean 0, variance t, and that their…
Chapter 11 Solutions
MyLab Math with Pearson eText -- Access Card -- for Using & Understanding Mathematics with Integrated Review
Ch. 11.A - Prob. 1QQCh. 11.A - Prob. 2QQCh. 11.A - Prob. 3QQCh. 11.A - Prob. 4QQCh. 11.A - Prob. 5QQCh. 11.A - Prob. 6QQCh. 11.A - Prob. 7QQCh. 11.A - Prob. 8QQCh. 11.A - Prob. 9QQCh. 11.A - Prob. 10QQ
Ch. 11.A - Prob. 1ECh. 11.A - 2. Define fundamental frequency, harmonic, and...Ch. 11.A - 3. What is a 12-tone scale? How are the...Ch. 11.A - 4. Explain how the notes of the scale are...Ch. 11.A - Prob. 5ECh. 11.A - Prob. 6ECh. 11.A - Prob. 7ECh. 11.A - Prob. 8ECh. 11.A - Prob. 9ECh. 11.A - Prob. 10ECh. 11.A - Prob. 11ECh. 11.A - Octaves. Starting with a tone having a frequency...Ch. 11.A - Notes of a Scale. Find the frequencies of the 12...Ch. 11.A - Prob. 14ECh. 11.A - Exponential Growth and Scales. Starting at middle...Ch. 11.A - 18. Exponential Growth and Scales. Starting at...Ch. 11.A - 19. Exponential Decay and Scales. What is the...Ch. 11.A - 16. The Dilemma of Temperament. Start at middle A,...Ch. 11.A - Prob. 19ECh. 11.A - Prob. 20ECh. 11.A - Prob. 21ECh. 11.A - Mathematics and Music. Visit a website devoted to...Ch. 11.A - Mathematics and Composers. Many musical composers,...Ch. 11.A - Prob. 24ECh. 11.A - Prob. 25ECh. 11.A - Digital Processing. A variety of apps and software...Ch. 11.A - Prob. 27ECh. 11.B - Prob. 1QQCh. 11.B - 2. All lines that are parallel in a real scene...Ch. 11.B - 3. The Last Supper in Figure 11.6. Which of the...Ch. 11.B - Prob. 4QQCh. 11.B - Prob. 5QQCh. 11.B - Prob. 6QQCh. 11.B - Prob. 7QQCh. 11.B - Prob. 8QQCh. 11.B - Prob. 9QQCh. 11.B - Prob. 10QQCh. 11.B - Prob. 1ECh. 11.B - Prob. 2ECh. 11.B - Prob. 3ECh. 11.B - Prob. 4ECh. 11.B - Prob. 5ECh. 11.B - 6. Briefly explain why there are only three...Ch. 11.B - 7. Briefly explain why more tilings are possible...Ch. 11.B - 8. What is the difference between periodic and...Ch. 11.B - Prob. 9ECh. 11.B - Prob. 10ECh. 11.B - Prob. 11ECh. 11.B - Prob. 12ECh. 11.B - Prob. 13ECh. 11.B - Prob. 14ECh. 11.B - Vanishing Points. Consider the simple drawing of a...Ch. 11.B - Correct Perspective. Consider the two boxes shown...Ch. 11.B - Drawing with Perspective. Make the square, circle,...Ch. 11.B - Drawing MATH with Perspective. Make the letters M,...Ch. 11.B - 19. The drawing in Figure 11.34 shows two poles...Ch. 11.B - Two Vanishing Points. Figure 11.35 shows a road...Ch. 11.B - Prob. 21ECh. 11.B - Prob. 22ECh. 11.B - Prob. 23ECh. 11.B - Prob. 24ECh. 11.B - Prob. 25ECh. 11.B - Prob. 26ECh. 11.B - Prob. 27ECh. 11.B - Prob. 28ECh. 11.B - Prob. 29ECh. 11.B - Prob. 30ECh. 11.B - 30-31 : Tilings from Translating and Reflecting...Ch. 11.B - 32-33: Tilings from Quadrilaterals. Make a tiling...Ch. 11.B - Tilings from Quadrilaterals. Make a tiling from...Ch. 11.B - Prob. 34ECh. 11.B - Prob. 35ECh. 11.B - Prob. 36ECh. 11.B - Prob. 37ECh. 11.B - Prob. 38ECh. 11.B - Art and Mathematics. Visit a website devoted to...Ch. 11.B - 40. Art Museums. Choose an art museum, and study...Ch. 11.B - Prob. 41ECh. 11.B - Penrose Tilings. Learn more about the nature and...Ch. 11.B - Prob. 43ECh. 11.C - Prob. 1QQCh. 11.C - 2. Which of the following is not a characteristic...Ch. 11.C - 3. If a 1-foot line segment is divided according...Ch. 11.C - 4. To make a golden rectangle, you should
a. a...Ch. 11.C - Prob. 5QQCh. 11.C - Prob. 6QQCh. 11.C - Suppose you start with a golden rectangle and cut...Ch. 11.C - Prob. 8QQCh. 11.C - Prob. 9QQCh. 11.C - Prob. 10QQCh. 11.C - Prob. 1ECh. 11.C - How is a golden rectangle formed?Ch. 11.C - What evidence suggests that the golden ratio and...Ch. 11.C - Prob. 4ECh. 11.C - 5. What is the Fibonacci sequence?
Ch. 11.C - 6. What is the connection between the Fibonacci...Ch. 11.C - 7. Maria cut her 4-foot walking stick into two...Ch. 11.C - Prob. 8ECh. 11.C - Prob. 9ECh. 11.C - Prob. 10ECh. 11.C - Prob. 11ECh. 11.C - Prob. 12ECh. 11.C - Prob. 13ECh. 11.C - Prob. 14ECh. 11.C - Prob. 15ECh. 11.C - Prob. 16ECh. 11.C - Prob. 17ECh. 11.C - 18. Everyday Golden Rectangles. Find at least...Ch. 11.C - 19. Finding . The property that defines the golden...Ch. 11.C - 20. Properties of
a. Enter into your calculator....Ch. 11.C - Prob. 21ECh. 11.C - The Lucas Sequence. A sequence called the Lucas...Ch. 11.C - Prob. 23ECh. 11.C - The Golden Navel. An Old theory claims that, on...Ch. 11.C - Prob. 25ECh. 11.C - Prob. 26ECh. 11.C - Prob. 27ECh. 11.C - Prob. 28ECh. 11.C - Golden Controversies. Many websites are devoted to...Ch. 11.C - 30. Fibonacci Numbers. Learn more about Fibonacci...
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