Understandable Statistics: Concepts and Methods
12th Edition
ISBN: 9781337119917
Author: Charles Henry Brase, Corrinne Pellillo Brase
Publisher: Cengage Learning
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Chapter 1.2, Problem 13P
Sampling: Random Use a random-number table to generate a list of six random numbers from 1 to 8615. Explain your work.
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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 1 Solutions
Understandable Statistics: Concepts and Methods
Ch. 1.1 - Statistical Literacy In a statistical study what...Ch. 1.1 - Statistical Literacy Are data at the nominal level...Ch. 1.1 - Statistical Literacy What is the difference...Ch. 1.1 - Statistical Literacy For a set population, does a...Ch. 1.1 - Critical Thinking Numbers are often assigned to...Ch. 1.1 - Interpretation Lucy conducted a survey asking some...Ch. 1.1 - Marketing: Fast Food A national survey asked 1261...Ch. 1.1 - Advertising: Auto Mileage What is the average...Ch. 1.1 - Ecology: Wetlands Government agencies carefully...Ch. 1.1 - Archaeology: Ireland The archaeological site of...
Ch. 1.1 - Student Life: Levels of Measurement Categorize...Ch. 1.1 - Business: Levels of Measurement Categorize these...Ch. 1.1 - Fishing: Levels of Measurement Categorize these...Ch. 1.1 - Education: Teacher Evaluation If you were going to...Ch. 1.1 - Critical Thinking You are interested in the...Ch. 1.2 - Statistical Literacy Explain the difference...Ch. 1.2 - Statistical Literacy Explain the difference...Ch. 1.2 - Statistical Literacy Marcie conducted a study of...Ch. 1.2 - Statistical Literacy A random sample of students...Ch. 1.2 - Interpretation In a random sample of 50 students...Ch. 1.2 - Interpretation A campus performance series...Ch. 1.2 - Critical Thinking Greg took a random sample of...Ch. 1.2 - Critical Thinking Consider the students in your...Ch. 1.2 - Critical Thinking Suppose you are assigned the...Ch. 1.2 - Critical Thinking In each of the following...Ch. 1.2 - Sampling: Random Use a random-number table to...Ch. 1.2 - Prob. 12PCh. 1.2 - Sampling: Random Use a random-number table to...Ch. 1.2 - Prob. 14PCh. 1.2 - Computer Simulation: Roll of a Die A die is a cube...Ch. 1.2 - Education: Test Construction Professor Gill is...Ch. 1.2 - Education: Test Construction Professor Gill uses...Ch. 1.2 - Sampling Methods: Benefits Package An important...Ch. 1.2 - Sampling Methods: Health Care Modern Managed...Ch. 1.3 - Statistical Literacy A study of college graduates...Ch. 1.3 - Statistical Literacy Consider a completely...Ch. 1.3 - Critical Thinking A brief survey regarding...Ch. 1.3 - Critical Thinking A randomized block design was...Ch. 1.3 - Interpretation Zane is examining two studies...Ch. 1.3 - Interpretation Suppose you are looking at the 2006...Ch. 1.3 - Ecology: Gathering Data Which technique for...Ch. 1.3 - General: Gathering Data Which technique for...Ch. 1.3 - General: Completely Randomized Experiment How...Ch. 1.3 - Surveys: Manipulation The New York Times did a...Ch. 1.3 - Critical Thinking An agricultural study is...Ch. 1 - Critical Thinking Sudoku is a puzzle consisting of...Ch. 1 - Prob. 2CRPCh. 1 - Statistical Literacy You are conducting a study of...Ch. 1 - Prob. 4CRPCh. 1 - Prob. 5CRPCh. 1 - General: Type of Sampling Categorize the type of...Ch. 1 - Prob. 7CRPCh. 1 - General: Experiment How would you use a completely...Ch. 1 - Prob. 11CRPCh. 1 - Prob. 2DHCh. 1 - Prob. 1LCCh. 1 - Discuss each of the following topics in class or...Ch. 1 - Prob. 1UTCh. 1 - Prob. 2UT
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