Nature of Mathematics (MindTap Course List)
13th Edition
ISBN: 9781133947257
Author: karl J. smith
Publisher: Cengage Learning
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Chapter 12.2, Problem 29PS
To determine
The value of the given expression
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For each month of the year, Taylor collected the average high temperatures in Jackson, Mississippi. He used the data to create the histogram shown. Which set of data did he use to create the histogram?
A
55, 60, 64, 72, 73, 75, 77, 81, 83, 91, 91, 92\ 55,\ 60,\ 64,\ 72,\ 73,\ 75,\ 77,\ 81,\ 83,\ 91,\ 91,\ 92 55, 60, 64, 72, 73, 75, 77, 81, 83, 91, 91, 92
B
55, 57, 60, 65, 70, 71, 78, 79, 85, 86, 88, 91\ 55,\ 57,\ 60,\ 65,\ 70,\ 71,\ 78,\ 79,\ 85,\ 86,\ 88,\ 91 55, 57, 60, 65, 70, 71, 78, 79, 85, 86, 88, 91
C
55, 60, 63, 64, 65, 71, 83, 87, 88, 88, 89, 93\ 55,\ 60,\ 63,\ 64,\ 65,\ 71,\ 83,\ 87,\ 88,\ 88,\ 89,\ 93 55, 60, 63, 64, 65, 71, 83, 87, 88, 88, 89, 93
D
55, 58, 60, 66, 68, 75, 77, 82, 86, 89, 91, 91\ 55,\ 58,\ 60,\ 66,\ 68,\ 75,\ 77,\ 82,\ 86,\ 89,\ 91,\ 91 55, 58, 60, 66, 68, 75, 77, 82, 86, 89, 91, 91
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?
Chapter 12 Solutions
Nature of Mathematics (MindTap Course List)
Ch. 12.1 - IN YOUR OWN WORDS What is a permutation? What is...Ch. 12.1 - Prob. 2PSCh. 12.1 - Prob. 3PSCh. 12.1 - Prob. 4PSCh. 12.1 - Evaluate each expression in Problems 3-32. 9P2Ch. 12.1 - Evaluate each expression in Problems 3-32. 9P3Ch. 12.1 - Evaluate each expression in Problems 3-32. 9P4Ch. 12.1 - Prob. 8PSCh. 12.1 - Evaluate each expression in Problems 3-32. 52P3Ch. 12.1 - Evaluate each expression in Problems 3-32. 4P4
Ch. 12.1 - Prob. 11PSCh. 12.1 - Evaluate each expression in Problems 3-32. 5P3Ch. 12.1 - Prob. 13PSCh. 12.1 - Prob. 14PSCh. 12.1 - Evaluate each expression in Problems 3-32. 92P0Ch. 12.1 - Prob. 16PSCh. 12.1 - Prob. 17PSCh. 12.1 - Evaluate each expression in Problems 3-32. 16P3Ch. 12.1 - Prob. 19PSCh. 12.1 - Prob. 20PSCh. 12.1 - Prob. 21PSCh. 12.1 - Prob. 22PSCh. 12.1 - Prob. 23PSCh. 12.1 - Evaluate each expression in Problems 3-32. 11P4Ch. 12.1 - Evaluate each expression in Problems 3-32. nP4Ch. 12.1 - Prob. 26PSCh. 12.1 - Prob. 27PSCh. 12.1 - Prob. 28PSCh. 12.1 - Evaluate each expression in Problems 3-32. 5PrCh. 12.1 - Evaluate each expression in Problems 3-32. 6PtCh. 12.1 - Prob. 31PSCh. 12.1 - Prob. 32PSCh. 12.1 - Prob. 33PSCh. 12.1 - Prob. 34PSCh. 12.1 - How many permutations are there of the words given...Ch. 12.1 - Prob. 36PSCh. 12.1 - Prob. 37PSCh. 12.1 - How many permutations are there of the words given...Ch. 12.1 - How many permutations are there of the words given...Ch. 12.1 - Prob. 40PSCh. 12.1 - Prob. 41PSCh. 12.1 - Prob. 42PSCh. 12.1 - Prob. 43PSCh. 12.1 - Prob. 44PSCh. 12.1 - Prob. 45PSCh. 12.1 - In how many ways can you select and read three...Ch. 12.1 - Suppose you have a set of cups and saucers which...Ch. 12.1 - Most ATMs require that you enter a four-digit...Ch. 12.1 - Some automobiles have five-button locks. To gain...Ch. 12.1 - A museum wishes to display eight paintings next to...Ch. 12.1 - Prob. 51PSCh. 12.1 - The Pick 3 at horse racetracks requires that a...Ch. 12.1 - Prob. 53PSCh. 12.1 - Prob. 54PSCh. 12.1 - My favourite Moroccan restaurant offers the...Ch. 12.1 - A world-famous prix fixe menu includes the...Ch. 12.1 - Suppose you flip a coin and keep a record of the...Ch. 12.1 - Prob. 58PSCh. 12.1 - Prob. 59PSCh. 12.1 - How long would it take to dial every possible...Ch. 12.2 - IN YOUR OWN WORDS What is a combination? What is...Ch. 12.2 - Prob. 2PSCh. 12.2 - Prob. 3PSCh. 12.2 - Evaluate each expression in Problems 332. (29)Ch. 12.2 - Evaluate each expression in Problems 332. (39)Ch. 12.2 - Evaluate each expression in Problems 332. (49)Ch. 12.2 - Evaluate each expression in Problems 332. (09)Ch. 12.2 - Prob. 8PSCh. 12.2 - Prob. 9PSCh. 12.2 - Prob. 10PSCh. 12.2 - Evaluate each expression in Problems 332. (44)Ch. 12.2 - Prob. 12PSCh. 12.2 - Prob. 13PSCh. 12.2 - Evaluate each expression in Problems 332. (35)Ch. 12.2 - Prob. 15PSCh. 12.2 - Prob. 16PSCh. 12.2 - Evaluate each expression in Problems 332. (4n)Ch. 12.2 - Evaluate each expression in Problems 332. Pk4Ch. 12.2 - Evaluate each expression in Problems 332. Cn5Ch. 12.2 - Prob. 20PSCh. 12.2 - Prob. 21PSCh. 12.2 - Prob. 22PSCh. 12.2 - Prob. 23PSCh. 12.2 - Prob. 24PSCh. 12.2 - Prob. 25PSCh. 12.2 - Prob. 26PSCh. 12.2 - Prob. 27PSCh. 12.2 - Prob. 28PSCh. 12.2 - Prob. 29PSCh. 12.2 - Prob. 30PSCh. 12.2 - Prob. 31PSCh. 12.2 - Prob. 32PSCh. 12.2 - A bag contains 12 pieces of candy. In how many...Ch. 12.2 - Prob. 34PSCh. 12.2 - Prob. 35PSCh. 12.2 - In how many ways can four aces be drawn from a...Ch. 12.2 - Prob. 37PSCh. 12.2 - Prob. 38PSCh. 12.2 - Prob. 39PSCh. 12.2 - Prob. 40PSCh. 12.2 - If a family has five children, in how many ways...Ch. 12.2 - If a family has six children, in how many ways...Ch. 12.2 - Prob. 43PSCh. 12.2 - How many different subsets can be chosen from the...Ch. 12.2 - Prob. 45PSCh. 12.2 - Prob. 46PSCh. 12.2 - Prob. 47PSCh. 12.2 - In Problems 47-56, decide whether you would use a...Ch. 12.2 - Prob. 49PSCh. 12.2 - In Problems 47-56, decide whether you would use a...Ch. 12.2 - Prob. 51PSCh. 12.2 - Prob. 52PSCh. 12.2 - Prob. 53PSCh. 12.2 - Prob. 54PSCh. 12.2 - Prob. 55PSCh. 12.2 - Prob. 56PSCh. 12.2 - a. Draw three points on a circle. How many...Ch. 12.2 - Draw n points on a circle n5. How many pentagons...Ch. 12.2 - Prob. 59PSCh. 12.2 - Prob. 60PSCh. 12.3 - IN YOUR OWN WORDS State the fundamental counting...Ch. 12.3 - Prob. 2PSCh. 12.3 - A Women selects an outfit consisting of a skirt,...Ch. 12.3 - If a state issued licence plates using the scheme...Ch. 12.3 - Prob. 5PSCh. 12.3 - Prob. 6PSCh. 12.3 - Prob. 7PSCh. 12.3 - New York license plates consist of three letters...Ch. 12.3 - Boats often relay messages by using flags. How...Ch. 12.3 - If a family has seven children, in how many ways...Ch. 12.3 - A certain lock has four tumblers, and each tumbler...Ch. 12.3 - Prob. 12PSCh. 12.3 - Prob. 13PSCh. 12.3 - Prob. 14PSCh. 12.3 - Prob. 15PSCh. 12.3 - You flip a coin n times and keep a record of the...Ch. 12.3 - Prob. 17PSCh. 12.3 - Prob. 18PSCh. 12.3 - Many states offer personalized license plates. The...Ch. 12.3 - Prob. 20PSCh. 12.3 - Foleys Village Inn offers the following menu in...Ch. 12.3 - Prob. 22PSCh. 12.3 - In how many ways could a club of 30 appoint a...Ch. 12.3 - In Problems 2438, classify each as a permutation,...Ch. 12.3 - Prob. 25PSCh. 12.3 - Prob. 26PSCh. 12.3 - Prob. 27PSCh. 12.3 - Prob. 28PSCh. 12.3 - In Problems 2438, classify each as a permutation,...Ch. 12.3 - In Problems 2438, classify each as a permutation,...Ch. 12.3 - In Problems 2438, classify each as a permutation,...Ch. 12.3 - Prob. 32PSCh. 12.3 - In Problems 2438, classify each as a permutation,...Ch. 12.3 - Prob. 34PSCh. 12.3 - Prob. 35PSCh. 12.3 - A space shuttle mission consists of a commander, a...Ch. 12.3 - Prob. 37PSCh. 12.3 - Prob. 38PSCh. 12.3 - Prob. 39PSCh. 12.3 - Consider selecting two elements, say, a, and b,...Ch. 12.3 - Consider selecting three elements, say, c,d, and...Ch. 12.3 - Prob. 42PSCh. 12.3 - Prob. 43PSCh. 12.3 - Prob. 44PSCh. 12.3 - Prob. 45PSCh. 12.3 - Prob. 46PSCh. 12.3 - Prob. 47PSCh. 12.3 - Prob. 48PSCh. 12.3 - Prob. 49PSCh. 12.3 - Prob. 50PSCh. 12.3 - Prob. 51PSCh. 12.3 - Prob. 52PSCh. 12.3 - Prob. 54PSCh. 12.3 - Prob. 55PSCh. 12.3 - Prob. 56PSCh. 12.3 - Prob. 57PSCh. 12.3 - Prob. 58PSCh. 12.3 - Prob. 59PSCh. 12.3 - Prob. 60PSCh. 12.4 - Prob. 1PSCh. 12.4 - Prob. 2PSCh. 12.4 - Prob. 3PSCh. 12.4 - Prob. 4PSCh. 12.4 - Prob. 5PSCh. 12.4 - Prob. 6PSCh. 12.4 - Prob. 7PSCh. 12.4 - Prob. 8PSCh. 12.4 - Prob. 9PSCh. 12.4 - Prob. 10PSCh. 12.4 - Prob. 11PSCh. 12.4 - Prob. 12PSCh. 12.4 - Prob. 13PSCh. 12.4 - Prob. 14PSCh. 12.4 - Prob. 15PSCh. 12.4 - Prob. 16PSCh. 12.4 - Prob. 17PSCh. 12.4 - Prob. 18PSCh. 12.4 - Prob. 19PSCh. 12.4 - Prob. 20PSCh. 12.4 - Prob. 21PSCh. 12.4 - Prob. 22PSCh. 12.4 - Prob. 23PSCh. 12.4 - Prob. 24PSCh. 12.4 - Prob. 25PSCh. 12.4 - Prob. 26PSCh. 12.4 - Prob. 27PSCh. 12.4 - Prob. 28PSCh. 12.4 - Prob. 29PSCh. 12.4 - Prob. 30PSCh. 12.4 - Prob. 31PSCh. 12.4 - Prob. 32PSCh. 12.4 - Determine whether each of the figures in Problems...Ch. 12.4 - Prob. 34PSCh. 12.4 - Determine whether each of the figures in Problems...Ch. 12.4 - Prob. 36PSCh. 12.4 - Prob. 37PSCh. 12.4 - Prob. 38PSCh. 12.4 - Prob. 39PSCh. 12.4 - Prob. 40PSCh. 12.4 - Prob. 41PSCh. 12.4 - Prob. 42PSCh. 12.4 - Prob. 43PSCh. 12.4 - Prob. 44PSCh. 12.4 - Prob. 45PSCh. 12.4 - Prob. 46PSCh. 12.4 - Prob. 47PSCh. 12.4 - Prob. 48PSCh. 12.4 - Prob. 49PSCh. 12.4 - Prob. 50PSCh. 12.4 - Prob. 51PSCh. 12.4 - Prob. 52PSCh. 12.4 - Prob. 53PSCh. 12.4 - Prob. 54PSCh. 12.4 - Prob. 55PSCh. 12.4 - Prob. 56PSCh. 12.4 - Prob. 57PSCh. 12.4 - Prob. 58PSCh. 12.4 - Prob. 59PSCh. 12.4 - Prob. 60PSCh. 12.CR - Prob. 1CRCh. 12.CR - Prob. 2CRCh. 12.CR - Prob. 3CRCh. 12.CR - Prob. 4CRCh. 12.CR - Prob. 5CRCh. 12.CR - Prob. 6CRCh. 12.CR - Prob. 7CRCh. 12.CR - Prob. 8CRCh. 12.CR - Prob. 9CRCh. 12.CR - Prob. 10CRCh. 12.CR - Prob. 11CRCh. 12.CR - Prob. 12CRCh. 12.CR - How many distinguishable permutations are there of...Ch. 12.CR - Prob. 14CRCh. 12.CR - Prob. 15CRCh. 12.CR - Prob. 16CRCh. 12.CR - Bob has one pair of shabby slacks, forty ties,...Ch. 12.CR - a.A certain mathematics test consists of 10...Ch. 12.CR - Prob. 19CRCh. 12.CR - Prob. 20CR
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