Discrete Mathematics with Graph Theory (Classic Version) (3rd Edition) (Pearson Modern Classics for Advanced Mathematics Series)
3rd Edition
ISBN: 9780134689555
Author: Edgar Goodaire, Michael Parmenter
Publisher: PEARSON
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Textbook Question
Chapter 1.2, Problem 10E
Express each of the following statements in disjunctive normal form.
(a)
(b)
(c)
(d)
(e)
(f)
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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?
The Course Name Real Analysis please Solve questions by Real Analysis
Chapter 1 Solutions
Discrete Mathematics with Graph Theory (Classic Version) (3rd Edition) (Pearson Modern Classics for Advanced Mathematics Series)
Ch. 1.1 - True/False Questions
“” means “”
Ch. 1.1 - A truth table based on four simple statements...Ch. 1.1 - True/False Questions
2. If is true, then is also...Ch. 1.1 - If p and q are both false, the truth value of...Ch. 1.1 - If pq is false, the truth value of (pq)(pq) is...Ch. 1.1 - pq andqp are logically equivalent.Ch. 1.1 - True/False Questions
7. A statement and its...Ch. 1.1 - (pq)(pq) is a tautology.Ch. 1.1 - True/False Questions
9. If B is a tautology and A...Ch. 1.1 - True/False Questions
10. If A and B are both...
Ch. 1.1 - Construct a truth table for each of the following...Ch. 1.1 - (a) If pq is false, determine the truth value of...Ch. 1.1 - 3. Determine the truth value for
when are all...Ch. 1.1 - 4. Repeat Exercise 3 in the case where are all...Ch. 1.1 - 5. (a) Show that is a tautology.
(b) Show that ...Ch. 1.1 - Prob. 6ECh. 1.1 - Prob. 7ECh. 1.1 - Prob. 8ECh. 1.1 - Prob. 9ECh. 1.1 - 10. (a) Show that the statement is not logically...Ch. 1.1 - 11. If and are statements, then the compound...Ch. 1.2 - True/False Questions
Two statements A and B are...Ch. 1.2 - True/False Questions
2. “A B” and “A B” mean the...Ch. 1.2 - True/False Questions
3. () () for any statement ....Ch. 1.2 - True/False Questions
4. for any statements
Ch. 1.2 - (p(qr))((pq)(pr)) for any statements p,q,r.Ch. 1.2 - ((pq))((p)(q)) for any statements p,q.Ch. 1.2 - If A Band C is any statement, then (A C) (B ...Ch. 1.2 - True/False Questions
8. is in disjunctive normal...Ch. 1.2 - (pq(r))((p)(q)(r)) is in disjunctive normal form.Ch. 1.2 - True/False Questions
10. Disjunctive normal form...Ch. 1.2 - Prob. 1ECh. 1.2 - (a) Show that p[(pq)] is a tautology. (b) What is...Ch. 1.2 - Simplify each of the following statements. (a)...Ch. 1.2 - 4. Using truth tables, verify the following...Ch. 1.2 - 5. Using the properties in the text together with...Ch. 1.2 - Prove that the statements (p(q))q and (p(q))p are...Ch. 1.2 - Prob. 7ECh. 1.2 - Prob. 8ECh. 1.2 - Prob. 9ECh. 1.2 - Express each of the following statements in...Ch. 1.2 - Find out what you can about Augustus De Morgan and...Ch. 1.3 - True/False Questions
An argument is valid if,...Ch. 1.3 - Prob. 2TFQCh. 1.3 - Prob. 3TFQCh. 1.3 - True/False Questions
4. De Morgan’s laws are two...Ch. 1.3 - The chain rule has pq and qr as its premises.Ch. 1.3 - Prob. 6TFQCh. 1.3 - Prob. 7TFQCh. 1.3 - Prob. 8TFQCh. 1.3 - Prob. 9TFQCh. 1.3 - Prob. 10TFQCh. 1.3 - Determine whether or not each of the following...Ch. 1.3 - 2. Verify that each of the five rules of inference...Ch. 1.3 - Verify that each of the following arguments is...Ch. 1.3 - Test the validity of each of the following...Ch. 1.3 - 5. Determine the validity of each of the following...Ch. 1.3 - Prob. 6ECh. 1.3 - Prob. 7ECh. 1.3 - Prob. 8ECh. 1.3 - Prob. 9ECh. 1.3 - 10. What language is being used when we say “modus...Ch. 1 - Construct a truth table for the compound statement...Ch. 1 - Determine the truth value of [p(q((r)s))](rt),...Ch. 1 - 3. Determine whether each statement is a...Ch. 1 - Two compound statements A and B have the property...Ch. 1 - 5. (a) Suppose A, B, and C are compound statements...Ch. 1 - Establish the logical equivalence of each of the...Ch. 1 - 7. Express each of the following statements in...Ch. 1 - Determine whether each of the following arguments...Ch. 1 - Discuss the validity of the argument pq(p)r Purple...Ch. 1 - 10. Determine the validity of each of the...
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