EP STATISTICS:ART+SCI...-MYLABSTATISTIC
4th Edition
ISBN: 9780135989029
Author: Agresti
Publisher: PEARSON CO
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Chapter 12, Problem 101CP
a.
To determine
Explain why it is sensible to set
b.
To determine
Explain why the distance is quadrupled when the velocity of the swing for the model
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solving problem 1
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…
Chapter 12 Solutions
EP STATISTICS:ART+SCI...-MYLABSTATISTIC
Ch. 12.1 - Car mileage and weight The Car Weight and Mileage...Ch. 12.1 - Prob. 2PBCh. 12.1 - Predicting maximum bench strength in males For the...Ch. 12.1 - Prob. 4PBCh. 12.1 - Mu, not y For a population regression equation,...Ch. 12.1 - Prob. 6PBCh. 12.1 - Study time and college GPA Exercise 3.39 in...Ch. 12.1 - Prob. 8PBCh. 12.1 - Cell phone specs Refer to the cell phone data set...Ch. 12.1 - Prob. 10PB
Ch. 12.2 - t-score? A regression analysis is conducted with...Ch. 12.2 - Prob. 12PBCh. 12.2 - Confidence interval for slope Refer to the...Ch. 12.2 - Prob. 14PBCh. 12.2 - Strength through leg press The high school female...Ch. 12.2 - Prob. 16PBCh. 12.2 - More girls are good? Repeat the previous exercise...Ch. 12.2 - CI and two-sided tests correspond Refer to the...Ch. 12.2 - Advertising and sales Each month, the owner of Caf...Ch. 12.2 - Prob. 20PBCh. 12.2 - GPA and skipping classrevisited Refer to the...Ch. 12.2 - Prob. 22PBCh. 12.3 - Dollars and thousands of dollars If a slope is...Ch. 12.3 - Prob. 24PBCh. 12.3 - Sketch scatterplot Sketch a scatterplot,...Ch. 12.3 - Prob. 26PBCh. 12.3 - Body fat For the Male Athlete Strength data file...Ch. 12.3 - Prob. 28PBCh. 12.3 - SAT regression toward mean Refer to the previous...Ch. 12.3 - Prob. 30PBCh. 12.3 - GPA and study time Refer to the association you...Ch. 12.3 - Prob. 32PBCh. 12.3 - Does tutoring help? For a class of 100 students,...Ch. 12.3 - Prob. 34PBCh. 12.3 - Golf regression In the first round of a golf...Ch. 12.3 - Prob. 36PBCh. 12.3 - Food and drink sales The owner of Berthas...Ch. 12.3 - Prob. 38PBCh. 12.3 - Violent crime and single-parent families Use...Ch. 12.4 - Poor predicted strengths The MINITAB output shows...Ch. 12.4 - Prob. 42PBCh. 12.4 - Bench press residuals The figure is a histogram of...Ch. 12.4 - Predicting house prices The House Selling Prices...Ch. 12.4 - Predicting clothes purchases For a random sample...Ch. 12.4 - Prob. 46PBCh. 12.4 - ANOVA table for leg press Exercise 12.15 referred...Ch. 12.4 - Prob. 48PBCh. 12.4 - Variability and F Refer to the previous two...Ch. 12.4 - Understanding an ANOVA table For a random sample...Ch. 12.4 - Predicting cell phone weight Refer to the cell...Ch. 12.4 - Cell phone ANOVA Report the ANOVA table for the...Ch. 12.5 - Savings grow exponentially You invest 100 in a...Ch. 12.5 - Prob. 55PBCh. 12.5 - Prob. 56PBCh. 12.5 - Prob. 57PBCh. 12.5 - Prob. 58PBCh. 12.5 - Prob. 59PBCh. 12.5 - Prob. 60PBCh. 12.5 - Prob. 61PBCh. 12 - Prob. 62CPCh. 12 - Prob. 63CPCh. 12 - Prob. 64CPCh. 12 - Prob. 65CPCh. 12 - Prob. 66CPCh. 12 - Prob. 67CPCh. 12 - Prob. 68CPCh. 12 - Prob. 69CPCh. 12 - Prob. 70CPCh. 12 - Prob. 71CPCh. 12 - Prob. 72CPCh. 12 - Prob. 73CPCh. 12 - Prob. 74CPCh. 12 - World population growth The table shows the world...Ch. 12 - Prob. 76CPCh. 12 - Prob. 77CPCh. 12 - Prob. 78CPCh. 12 - Prob. 79CPCh. 12 - Prob. 81CPCh. 12 - Prob. 82CPCh. 12 - Prob. 83CPCh. 12 - Prob. 84CPCh. 12 - Prob. 85CPCh. 12 - Prob. 86CPCh. 12 - Prob. 87CPCh. 12 - Prob. 88CPCh. 12 - Prob. 89CPCh. 12 - Assumptions What assumptions are needed to use the...Ch. 12 - Assumptions fail? Refer to the previous exercise....Ch. 12 - Lots of standard deviations Explain carefully the...Ch. 12 - Decrease in home values A Freddie Mac quarterly...Ch. 12 - Population growth Exercise 12.57 about U.S....Ch. 12 - Multiple choice: Interpret r One can interpret r =...Ch. 12 - Multiple choice: Correlation invalid The...Ch. 12 - Multiple choice: Slope and correlation The slope...Ch. 12 - Multiple choice: Regress x on y The regression of...Ch. 12 - Multiple choice: Income and height University of...Ch. 12 - True or false The variables y = annual income...Ch. 12 - Prob. 101CPCh. 12 - Why is there regression toward the mean? Refer to...Ch. 12 - Prob. 103CPCh. 12 - Prob. 104CPCh. 12 - Prob. 105CPCh. 12 - Prob. 106CP
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