ELEMENTARY STATISTICS W/CONNECT >IP<
4th Edition
ISBN: 9781259746826
Author: Bluman
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 1.2, Problem 8E
To determine
Whether the data is qualitative or quantitative
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
We consider a 4-dimensional stock price model given (under P) by
dẴ₁ = µ· Xt dt + йt · ΣdŴt
where (W) is an n-dimensional Brownian motion,
π = (0.02, 0.01, -0.02, 0.05),
0.2
0
0
0
0.3
0.4
0
0
Σ=
-0.1
-4a За
0
0.2
0.4 -0.1 0.2)
and a E R. We assume that ☑0 = (1, 1, 1, 1) and that the interest rate on the market is r = 0.02.
(a) Give a condition on a that would make stock #3 be the one with largest volatility.
(b) Find the diversification coefficient for this portfolio as a function of a.
(c) Determine the maximum diversification coefficient d that you could reach by varying the
value of a?
2
Question 1. Your manager asks you to explain why the Black-Scholes model may be inappro-
priate for pricing options in practice. Give one reason that would substantiate this claim?
Question 2. We consider stock #1 and stock #2 in the model of Problem 2. Your manager
asks you to pick only one of them to invest in based on the model provided. Which one do you
choose and why ?
Question 3. Let (St) to be an asset modeled by the Black-Scholes SDE. Let Ft be the price
at time t of a European put with maturity T and strike price K. Then, the discounted option
price process (ert Ft) t20 is a martingale. True or False? (Explain your answer.)
Question 4. You are considering pricing an American put option using a Black-Scholes model
for the underlying stock. An explicit formula for the price doesn't exist. In just a few words (no
more than 2 sentences), explain how you would proceed to price it.
Question 5. We model a short rate with a Ho-Lee model drt = ln(1+t) dt +2dWt. Then the
interest rate…
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
ELEMENTARY STATISTICS W/CONNECT >IP<
Ch. 1.1 - Read the following on attendance and grades, and...Ch. 1.1 - Define statistics.Ch. 1.1 - What is a variable?Ch. 1.1 - What is meant by a census?Ch. 1.1 - How does a population differ from a sample?Ch. 1.1 - Explain the difference between descriptive and...Ch. 1.1 - Name three areas where probability is used.Ch. 1.1 - Why is information obtained from samples used more...Ch. 1.1 - What is meant by a biased sample?Ch. 1.1 - determine whether descriptive or inferential...
Ch. 1.1 - determine whether descriptive or inferential...Ch. 1.1 - Prob. 11ECh. 1.1 - determine whether descriptive or inferential...Ch. 1.1 - Prob. 13ECh. 1.1 - Prob. 14ECh. 1.1 - Prob. 15ECh. 1.1 - Prob. 16ECh. 1.1 - determine whether descriptive or inferential...Ch. 1.2 - Applying the Concepts 1-2 Fatal Transportation...Ch. 1.2 - Explain the difference between qualitative...Ch. 1.2 - Prob. 2ECh. 1.2 - Why are continuous variables rounded when they are...Ch. 1.2 - Name and define the four types of measurement...Ch. 1.2 - Prob. 5ECh. 1.2 - determine whether the data are qualitative or...Ch. 1.2 - determine whether the data are qualitative or...Ch. 1.2 - Prob. 8ECh. 1.2 - Prob. 9ECh. 1.2 - determine whether the data are qualitative or...Ch. 1.2 - Prob. 11ECh. 1.2 - determine whether the data are discrete or...Ch. 1.2 - Prob. 13ECh. 1.2 - Prob. 14ECh. 1.2 - determine whether the data are discrete or...Ch. 1.2 - determine whether the data are discrete or...Ch. 1.2 - Prob. 17ECh. 1.2 - give the boundaries of each value. 18. 6.3...Ch. 1.2 - give the boundaries of each value. 19. 143 milesCh. 1.2 - Prob. 20ECh. 1.2 - Prob. 21ECh. 1.2 - give the boundaries of each value. 22. 19 quartsCh. 1.2 - classify each as nominal-level, ordinal-level,...Ch. 1.2 - Prob. 24ECh. 1.2 - Prob. 25ECh. 1.2 - classify each as nominal-level, ordinal-level,...Ch. 1.2 - Prob. 27ECh. 1.2 - classify each as nominal-level, ordinal-level,...Ch. 1.2 - Prob. 29ECh. 1.2 - Prob. 30ECh. 1.3 - Applying the Concepts 13 American Culture and Drug...Ch. 1.3 - Name five ways that data can be collected.Ch. 1.3 - What is meant by sampling error and nonsampling...Ch. 1.3 - Why are random numbers used in sampling, and how...Ch. 1.3 - Name and define the four basic sampling methods.Ch. 1.3 - Prob. 5ECh. 1.3 - Prob. 6ECh. 1.3 - Prob. 7ECh. 1.3 - For Exercises 510, define a population that may...Ch. 1.3 - For Exercises 510, define a population that may...Ch. 1.3 - For Exercises 5-10, define a population that may...Ch. 1.3 - indentify the sampling method that was used. 11....Ch. 1.3 - indentify the sampling method that was used. 12....Ch. 1.3 - indentify the sampling method that was used. 13....Ch. 1.3 - indentify the sampling method that was used. 14....Ch. 1.3 - Prob. 15ECh. 1.3 - indentify the sampling method that was used. 16....Ch. 1.4 - Prob. 1ACCh. 1.4 - Explain the difference between an observational...Ch. 1.4 - Prob. 2ECh. 1.4 - List some advantages and disadvantages of an...Ch. 1.4 - List some advantages and disadvantages of an...Ch. 1.4 - What is the difference between an experimental...Ch. 1.4 - What is the difference between independent...Ch. 1.4 - Why are a treatment group and a control group used...Ch. 1.4 - Explain the Hawthorne effect.Ch. 1.4 - What is a confounding variable?Ch. 1.4 - Define the placebo effect in a statistical study.Ch. 1.4 - Prob. 11ECh. 1.4 - Why do researchers use randomization in...Ch. 1.4 - Prob. 13ECh. 1.4 - Prob. 14ECh. 1.4 - Prob. 15ECh. 1.4 - Prob. 16ECh. 1.4 - Prob. 17ECh. 1.4 - Prob. 18ECh. 1.4 - identify the independent variable and the...Ch. 1.4 - identify the independent variable and the...Ch. 1.4 - Prob. 21ECh. 1.4 - Prob. 22ECh. 1.4 - Prob. 23ECh. 1.4 - Prob. 24ECh. 1.4 - Prob. 25ECh. 1.4 - suggest some confounding variables that the...Ch. 1.4 - For Exercises 2731, give a reason why the...Ch. 1.4 - Here is the whole truth about back pain.Ch. 1.4 - For Exercises 2731, give a reason why the...Ch. 1.4 - give a reason why the statement made might be...Ch. 1.4 - Prob. 31ECh. 1.4 - List the steps you should perform when conducting...Ch. 1.4 - Prob. 33ECh. 1.4 - Comment on the following statement, taken from a...Ch. 1.4 - In an ad for women, the following statement was...Ch. 1.4 - Prob. 36ECh. 1.4 - Prob. 37ECh. 1.4 - An ad for an exercise product stated: Using this...Ch. 1.4 - Prob. 39ECh. 1.4 - Just l capsule of Brand X can provide 24 hours of...Ch. 1.4 - Male children born to women who smoke during...Ch. 1.4 - Caffeine and Health In the 1980s, a study linked...Ch. 1 - state whether descriptive or inferential...Ch. 1 - Prob. 1.1.2RECh. 1 - state whether descriptive or inferential...Ch. 1 - state whether descriptive or inferential...Ch. 1 - state whether descriptive or inferential...Ch. 1 - state whether descriptive or inferential...Ch. 1 - Prob. 1.1.7RECh. 1 - state whether descriptive or inferential...Ch. 1 - classify each as nominal-level, ordinal-level,...Ch. 1 - Classify each as nominal-level, ordinal-level,...Ch. 1 - Prob. 1.2.11RECh. 1 - classify each as nominal-level, ordinal-level,...Ch. 1 - classify each as nominal-level, ordinal-level,...Ch. 1 - Prob. 1.2.14RECh. 1 - classify each as nominal-level, ordinal-level,...Ch. 1 - classify each as nominal-level, ordinal-level,...Ch. 1 - Prob. 1.2.17RECh. 1 - classify each as nominal-level, ordinal-level,...Ch. 1 - classify each variable as qualitative or...Ch. 1 - Prob. 1.2.20RECh. 1 - classify each variable as qualitative or...Ch. 1 - classify each variable as qualitative or...Ch. 1 - Prob. 1.2.23RECh. 1 - classify each variable as qualitative or...Ch. 1 - classify each variable as qualitative or...Ch. 1 - Prob. 1.2.26RECh. 1 - Prob. 1.2.27RECh. 1 - classify each variable as discrete or continuous....Ch. 1 - classify each variable as discrete or continuous....Ch. 1 - Prob. 1.2.30RECh. 1 - classify each variable as discrete or continuous....Ch. 1 - classify each variable as discrete or continuous....Ch. 1 - Prob. 1.2.33RECh. 1 - classify each variable as discrete or continuous....Ch. 1 - Prob. 1.2.35RECh. 1 - give the boundaries of each value. 36. 105.4...Ch. 1 - give the boundaries of each value. 37. 72.6 tons.Ch. 1 - Prob. 1.2.38RECh. 1 - classify each sample as random, systematic,...Ch. 1 - Prob. 1.3.40RECh. 1 - Prob. 1.3.41RECh. 1 - classify each sample as random, systematic,...Ch. 1 - classify each sample as random, systematic,...Ch. 1 - classify each sample as random, systematic,...Ch. 1 - identify each study as being either observational...Ch. 1 - identify each study as being either observational...Ch. 1 - Prob. 1.4.47RECh. 1 - Prob. 1.4.48RECh. 1 - Prob. 1.4.49RECh. 1 - identify the independent and dependent variables...Ch. 1 - identify the independent and dependent variables...Ch. 1 - Prob. 1.4.52RECh. 1 - explain why the claims of these studies might be...Ch. 1 - Prob. 1.4.54RECh. 1 - Prob. 1.4.55RECh. 1 - For Exercises 5358, explain why the claims of...Ch. 1 - explain why the claims of these studies might be...Ch. 1 - explain why the claims of these studies might be...Ch. 1 - Determine whether each statement is true or false....Ch. 1 - Determine whether each statement is true or false....Ch. 1 - Prob. 3CQCh. 1 - Prob. 4CQCh. 1 - Prob. 5CQCh. 1 - The height of basketball players is considered a...Ch. 1 - Prob. 7CQCh. 1 - Prob. 8CQCh. 1 - Select the best answer. 9. What are the boundaries...Ch. 1 - Select the best answer. 10. A researcher divided...Ch. 1 - Prob. 11CQCh. 1 - Select the best answer. 12. A study that involves...Ch. 1 - Prob. 13CQCh. 1 - Two major branches of statistics are _____ and...Ch. 1 - Prob. 15CQCh. 1 - The group of all subjects under study is called...Ch. 1 - A group of subjects selected from the group of all...Ch. 1 - Three reasons why samples are used in statistics:...Ch. 1 - The four basic sampling methods are a. ______ b....Ch. 1 - Prob. 20CQCh. 1 - Prob. 21CQCh. 1 - For each statement, decide whether descriptive or...Ch. 1 - Classify each as nominal-level, ordinal-level,...Ch. 1 - Classify each variable as discrete or continuous....Ch. 1 - Give the boundaries of each. a. 32 minutes b. 0.48...Ch. 1 - Prob. 1CTCCh. 1 - Prob. 2CTCCh. 1 - Prob. 3CTCCh. 1 - Prob. 4CTCCh. 1 - Prob. 5CTCCh. 1 - Prob. 6CTC
Knowledge Booster
Similar questions
- The managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c. Question content area bottom Part 1 a. Develop a simple linear regression model between billable hours and overhead costs. Overhead Costsequals=212495.2212495.2plus+left parenthesis 42.4857 right parenthesis42.485742.4857times×Billable Hours (Round the constant to one decimal place as needed. Round the coefficient to four decimal places as needed. Do not include the $ symbol in your answers.) Part 2 b. Interpret the coefficients of your regression model. Specifically, what does the fixed component of the model mean to the consulting firm? Interpret the fixed term, b 0b0, if appropriate. Choose the correct answer below. A. The value of b 0b0 is the predicted billable hours for an overhead cost of 0 dollars. B. It is not appropriate to interpret b 0b0, because its value…arrow_forwardUsing the accompanying Home Market Value data and associated regression line, Market ValueMarket Valueequals=$28,416+$37.066×Square Feet, compute the errors associated with each observation using the formula e Subscript ieiequals=Upper Y Subscript iYiminus−ModifyingAbove Upper Y with caret Subscript iYi and construct a frequency distribution and histogram. LOADING... Click the icon to view the Home Market Value data. Question content area bottom Part 1 Construct a frequency distribution of the errors, e Subscript iei. (Type whole numbers.) Error Frequency minus−15 comma 00015,000less than< e Subscript iei less than or equals≤minus−10 comma 00010,000 0 minus−10 comma 00010,000less than< e Subscript iei less than or equals≤minus−50005000 5 minus−50005000less than< e Subscript iei less than or equals≤0 21 0less than< e Subscript iei less than or equals≤50005000 9…arrow_forwardThe managing director of a consulting group has the accompanying monthly data on total overhead costs and professional labor hours to bill to clients. Complete parts a through c Overhead Costs Billable Hours345000 3000385000 4000410000 5000462000 6000530000 7000545000 8000arrow_forward
- Using the accompanying Home Market Value data and associated regression line, Market ValueMarket Valueequals=$28,416plus+$37.066×Square Feet, compute the errors associated with each observation using the formula e Subscript ieiequals=Upper Y Subscript iYiminus−ModifyingAbove Upper Y with caret Subscript iYi and construct a frequency distribution and histogram. Square Feet Market Value1813 911001916 1043001842 934001814 909001836 1020002030 1085001731 877001852 960001793 893001665 884001852 1009001619 967001690 876002370 1139002373 1131001666 875002122 1161001619 946001729 863001667 871001522 833001484 798001589 814001600 871001484 825001483 787001522 877001703 942001485 820001468 881001519 882001518 885001483 765001522 844001668 909001587 810001782 912001483 812001519 1007001522 872001684 966001581 86200arrow_forwarda. Find the value of A.b. Find pX(x) and py(y).c. Find pX|y(x|y) and py|X(y|x)d. Are x and y independent? Why or why not?arrow_forwardThe PDF of an amplitude X of a Gaussian signal x(t) is given by:arrow_forward
- The PDF of a random variable X is given by the equation in the picture.arrow_forwardFor a binary asymmetric channel with Py|X(0|1) = 0.1 and Py|X(1|0) = 0.2; PX(0) = 0.4 isthe probability of a bit of “0” being transmitted. X is the transmitted digit, and Y is the received digit.a. Find the values of Py(0) and Py(1).b. What is the probability that only 0s will be received for a sequence of 10 digits transmitted?c. What is the probability that 8 1s and 2 0s will be received for the same sequence of 10 digits?d. What is the probability that at least 5 0s will be received for the same sequence of 10 digits?arrow_forwardV2 360 Step down + I₁ = I2 10KVA 120V 10KVA 1₂ = 360-120 or 2nd Ratio's V₂ m 120 Ratio= 360 √2 H I2 I, + I2 120arrow_forward
- Q2. [20 points] An amplitude X of a Gaussian signal x(t) has a mean value of 2 and an RMS value of √(10), i.e. square root of 10. Determine the PDF of x(t).arrow_forwardIn a network with 12 links, one of the links has failed. The failed link is randomlylocated. An electrical engineer tests the links one by one until the failed link is found.a. What is the probability that the engineer will find the failed link in the first test?b. What is the probability that the engineer will find the failed link in five tests?Note: You should assume that for Part b, the five tests are done consecutively.arrow_forwardProblem 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…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
MATLAB: An Introduction with ApplicationsStatisticsISBN:9781119256830Author:Amos GilatPublisher:John Wiley & Sons Inc
Probability and Statistics for Engineering and th...StatisticsISBN:9781305251809Author:Jay L. DevorePublisher:Cengage Learning
Statistics for The Behavioral Sciences (MindTap C...StatisticsISBN:9781305504912Author:Frederick J Gravetter, Larry B. WallnauPublisher:Cengage Learning
Elementary Statistics: Picturing the World (7th E...StatisticsISBN:9780134683416Author:Ron Larson, Betsy FarberPublisher:PEARSON
The Basic Practice of StatisticsStatisticsISBN:9781319042578Author:David S. Moore, William I. Notz, Michael A. FlignerPublisher:W. H. Freeman
Introduction to the Practice of StatisticsStatisticsISBN:9781319013387Author:David S. Moore, George P. McCabe, Bruce A. CraigPublisher:W. H. Freeman
MATLAB: An Introduction with Applications
Statistics
ISBN:9781119256830
Author:Amos Gilat
Publisher:John Wiley & Sons Inc
Probability and Statistics for Engineering and th...
Statistics
ISBN:9781305251809
Author:Jay L. Devore
Publisher:Cengage Learning
Statistics for The Behavioral Sciences (MindTap C...
Statistics
ISBN:9781305504912
Author:Frederick J Gravetter, Larry B. Wallnau
Publisher:Cengage Learning
Elementary Statistics: Picturing the World (7th E...
Statistics
ISBN:9780134683416
Author:Ron Larson, Betsy Farber
Publisher:PEARSON
The Basic Practice of Statistics
Statistics
ISBN:9781319042578
Author:David S. Moore, William I. Notz, Michael A. Fligner
Publisher:W. H. Freeman
Introduction to the Practice of Statistics
Statistics
ISBN:9781319013387
Author:David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:W. H. Freeman