Statistics for the Behavioral Sciences
3rd Edition
ISBN: 9781506386256
Author: Gregory J. Privitera
Publisher: SAGE Publications, Inc
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Chapter 12, Problem 5FP
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Determine the number of factors is being observed in one-way between-subjects ANOVA.
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Kate, Luke, Mary and Nancy are sharing a cake. The cake had previously been divided into four slices (s1, s2, s3 and s4). What is an example of fair division of the cake
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Question 2. An American option on a stock has payoff given by F = f(St) when it is exercised
at time t. We know that the function f is convex. A person claims that because of convexity,
it is optimal to exercise at expiration T. Do you agree with them?
Chapter 12 Solutions
Statistics for the Behavioral Sciences
Ch. 12.2 - Prob. 1.1LCCh. 12.2 - Prob. 1.2LCCh. 12.2 - Prob. 1.3LCCh. 12.2 - Prob. 1.4LCCh. 12.4 - Prob. 2.1LCCh. 12.4 - Prob. 2.2LCCh. 12.4 - Prob. 2.3LCCh. 12.4 - Prob. 2.4LCCh. 12.6 - Prob. 3.1LCCh. 12.6 - Prob. 3.2LC
Ch. 12.6 - Prob. 3.3LCCh. 12.6 - Prob. 3.4LCCh. 12.6 - Prob. 3.5LCCh. 12.6 - Prob. 3.6LCCh. 12.7 - Prob. 4.1LCCh. 12.7 - Prob. 4.2LCCh. 12.7 - Prob. 4.3LCCh. 12.9 - Prob. 5.1LCCh. 12.9 - Prob. 5.2LCCh. 12 - Prob. 1FPCh. 12 - Prob. 2FPCh. 12 - Prob. 3FPCh. 12 - Prob. 4FPCh. 12 - Prob. 5FPCh. 12 - Prob. 6FPCh. 12 - Prob. 7FPCh. 12 - Prob. 8FPCh. 12 - Prob. 9FPCh. 12 - Prob. 10FPCh. 12 - Prob. 11FPCh. 12 - Prob. 12FPCh. 12 - Prob. 13CAPCh. 12 - Prob. 14CAPCh. 12 - Prob. 15CAPCh. 12 - Prob. 16CAPCh. 12 - Prob. 17CAPCh. 12 - Prob. 18CAPCh. 12 - Prob. 19CAPCh. 12 - Prob. 20CAPCh. 12 - Prob. 21CAPCh. 12 - Prob. 22CAPCh. 12 - Prob. 23CAPCh. 12 - Prob. 24CAPCh. 12 - Prob. 25CAPCh. 12 - Prob. 26CAPCh. 12 - Prob. 27CAPCh. 12 - Prob. 28CAPCh. 12 - Prob. 29PRCh. 12 - Prob. 30PRCh. 12 - Prob. 31PRCh. 12 - Prob. 32PRCh. 12 - Prob. 33PRCh. 12 - Prob. 34PR
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- Question 4. We consider a CRR model with So == 5 and up and down factors u = 1.03 and d = 0.96. We consider the interest rate r = 4% (over one period). Is this a suitable CRR model? (Explain your answer.)arrow_forwardQuestion 3. We want to price a put option with strike price K and expiration T. Two financial advisors estimate the parameters with two different statistical methods: they obtain the same return rate μ, the same volatility σ, but the first advisor has interest r₁ and the second advisor has interest rate r2 (r1>r2). They both use a CRR model with the same number of periods to price the option. Which advisor will get the larger price? (Explain your answer.)arrow_forwardQuestion 5. We consider a put option with strike price K and expiration T. This option is priced using a 1-period CRR model. We consider r > 0, and σ > 0 very large. What is the approximate price of the option? In other words, what is the limit of the price of the option as σ∞. (Briefly justify your answer.)arrow_forward
- Question 6. You collect daily data for the stock of a company Z over the past 4 months (i.e. 80 days) and calculate the log-returns (yk)/(-1. You want to build a CRR model for the evolution of the stock. The expected value and standard deviation of the log-returns are y = 0.06 and Sy 0.1. The money market interest rate is r = 0.04. Determine the risk-neutral probability of the model.arrow_forwardSeveral markets (Japan, Switzerland) introduced negative interest rates on their money market. In this problem, we will consider an annual interest rate r < 0. We consider a stock modeled by an N-period CRR model where each period is 1 year (At = 1) and the up and down factors are u and d. (a) We consider an American put option with strike price K and expiration T. Prove that if <0, the optimal strategy is to wait until expiration T to exercise.arrow_forwardWe consider an N-period CRR model where each period is 1 year (At = 1), the up factor is u = 0.1, the down factor is d = e−0.3 and r = 0. We remind you that in the CRR model, the stock price at time tn is modeled (under P) by Sta = So exp (μtn + σ√AtZn), where (Zn) is a simple symmetric random walk. (a) Find the parameters μ and σ for the CRR model described above. (b) Find P Ste So 55/50 € > 1). StN (c) Find lim P 804-N (d) Determine q. (You can use e- 1 x.) Ste (e) Find Q So (f) Find lim Q 004-N StN Soarrow_forward
- In this problem, we consider a 3-period stock market model with evolution given in Fig. 1 below. Each period corresponds to one year. The interest rate is r = 0%. 16 22 28 12 16 12 8 4 2 time Figure 1: Stock evolution for Problem 1. (a) A colleague notices that in the model above, a movement up-down leads to the same value as a movement down-up. He concludes that the model is a CRR model. Is your colleague correct? (Explain your answer.) (b) We consider a European put with strike price K = 10 and expiration T = 3 years. Find the price of this option at time 0. Provide the replicating portfolio for the first period. (c) In addition to the call above, we also consider a European call with strike price K = 10 and expiration T = 3 years. Which one has the highest price? (It is not necessary to provide the price of the call.) (d) We now assume a yearly interest rate r = 25%. We consider a Bermudan put option with strike price K = 10. It works like a standard put, but you can exercise it…arrow_forwardIn this problem, we consider a 2-period stock market model with evolution given in Fig. 1 below. Each period corresponds to one year (At = 1). The yearly interest rate is r = 1/3 = 33%. This model is a CRR model. 25 15 9 10 6 4 time Figure 1: Stock evolution for Problem 1. (a) Find the values of up and down factors u and d, and the risk-neutral probability q. (b) We consider a European put with strike price K the price of this option at time 0. == 16 and expiration T = 2 years. Find (c) Provide the number of shares of stock that the replicating portfolio contains at each pos- sible position. (d) You find this option available on the market for $2. What do you do? (Short answer.) (e) We consider an American put with strike price K = 16 and expiration T = 2 years. Find the price of this option at time 0 and describe the optimal exercising strategy. (f) We consider an American call with strike price K ○ = 16 and expiration T = 2 years. Find the price of this option at time 0 and describe…arrow_forward2.2, 13.2-13.3) question: 5 point(s) possible ubmit test The accompanying table contains the data for the amounts (in oz) in cans of a certain soda. The cans are labeled to indicate that the contents are 20 oz of soda. Use the sign test and 0.05 significance level to test the claim that cans of this soda are filled so that the median amount is 20 oz. If the median is not 20 oz, are consumers being cheated? Click the icon to view the data. What are the null and alternative hypotheses? OA. Ho: Medi More Info H₁: Medi OC. Ho: Medi H₁: Medi Volume (in ounces) 20.3 20.1 20.4 Find the test stat 20.1 20.5 20.1 20.1 19.9 20.1 Test statistic = 20.2 20.3 20.3 20.1 20.4 20.5 Find the P-value 19.7 20.2 20.4 20.1 20.2 20.2 P-value= (R 19.9 20.1 20.5 20.4 20.1 20.4 Determine the p 20.1 20.3 20.4 20.2 20.3 20.4 Since the P-valu 19.9 20.2 19.9 Print Done 20 oz 20 oz 20 oz 20 oz ce that the consumers are being cheated.arrow_forward
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