Fundamentals of Differential Equations and Boundary Value Problems
7th Edition
ISBN: 9780321977106
Author: Nagle, R. Kent
Publisher: Pearson Education, Limited
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Chapter 12.2, Problem 4E
To determine
To Identify:
The classification of the critical point of a given system of linear equation at the origin.
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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 12 Solutions
Fundamentals of Differential Equations and Boundary Value Problems
Ch. 12.2 - In Problem 16, classify the critical point at the...Ch. 12.2 - Prob. 2ECh. 12.2 - Prob. 3ECh. 12.2 - Prob. 4ECh. 12.2 - Prob. 5ECh. 12.2 - Prob. 6ECh. 12.2 - Prob. 7ECh. 12.2 - Prob. 8ECh. 12.2 - Prob. 9ECh. 12.2 - In Problem 712, find and classify the critical...
Ch. 12.2 - In Problem 712, find and classify the critical...Ch. 12.2 - In Problem 712, find and classify the critical...Ch. 12.2 - Prob. 13ECh. 12.2 - In Problems 13-20, classify the critical point at...Ch. 12.2 - Prob. 15ECh. 12.2 - Prob. 16ECh. 12.2 - Prob. 17ECh. 12.2 - In Problems 13-20, classify the critical point at...Ch. 12.2 - Prob. 19ECh. 12.2 - Prob. 20ECh. 12.2 - Show that when the system x(t)=ax+by+p,...Ch. 12.2 - Prob. 22ECh. 12.2 - Prob. 23ECh. 12.2 - Prob. 24ECh. 12.2 - Prob. 25ECh. 12.2 - Show when the roots of the characteristic equation...Ch. 12.2 - Prob. 27ECh. 12.3 - In Problems 1 -8, show that the given system is...Ch. 12.3 - Prob. 2ECh. 12.3 - Prob. 3ECh. 12.3 - Prob. 4ECh. 12.3 - Prob. 5ECh. 12.3 - Prob. 6ECh. 12.3 - Prob. 7ECh. 12.3 - Prob. 8ECh. 12.3 - In Problems 9 -12, find all the critical points...Ch. 12.3 - Prob. 10ECh. 12.3 - Prob. 11ECh. 12.3 - In Problems 9 -12, find all the critical points...Ch. 12.3 - In Problems 13-16, convert the second-order...Ch. 12.3 - In Problems 13-16, convert the second-order...Ch. 12.3 - Prob. 15ECh. 12.3 - Prob. 16ECh. 12.3 - Prob. 17ECh. 12.3 - Prob. 18ECh. 12.3 - Prob. 19ECh. 12.3 - Prob. 20ECh. 12.3 - van der Pols Equation. a. Show that van der Pols...Ch. 12.3 - Consider the system dxdt=(+)x+y, dydt=x+(+)y,...Ch. 12.3 - Prob. 23ECh. 12.3 - Show that coexistence occurs in the competing...Ch. 12.3 - When one of the populations in a competing species...Ch. 12.4 - Prob. 1ECh. 12.4 - Prob. 2ECh. 12.4 - Prob. 3ECh. 12.4 - Prob. 4ECh. 12.4 - Prob. 5ECh. 12.4 - Prob. 6ECh. 12.4 - Prob. 7ECh. 12.4 - Prob. 8ECh. 12.4 - Prob. 9ECh. 12.4 - Prob. 10ECh. 12.4 - Prob. 11ECh. 12.4 - Prob. 12ECh. 12.4 - Prob. 13ECh. 12.4 - Prob. 14ECh. 12.4 - Prob. 15ECh. 12.4 - Prob. 16ECh. 12.4 - Prob. 17ECh. 12.4 - Prob. 18ECh. 12.4 - Prob. 19ECh. 12.4 - Prob. 20ECh. 12.4 - Prob. 21ECh. 12.5 - In Problems 1-8, use Lyapunovs direct method to...Ch. 12.5 - In Problems 1-8, use Lyapunovs direct method to...Ch. 12.5 - In Problems 1-8, use Lyapunovs direct method to...Ch. 12.5 - Prob. 4ECh. 12.5 - In Problems 1-8, use Lyapunovs direct method to...Ch. 12.5 - Prob. 6ECh. 12.5 - Prob. 7ECh. 12.5 - Prob. 8ECh. 12.5 - In problem 9-14, use Lyapunovs direct method to...Ch. 12.5 - In problem 9-14, use Lyapunovs direct method to...Ch. 12.5 - Prob. 11ECh. 12.5 - Prob. 12ECh. 12.5 - Prob. 13ECh. 12.5 - Prob. 14ECh. 12.5 - Prob. 15ECh. 12.5 - Prob. 16ECh. 12.5 - Prove that the zero solution for a conservative...Ch. 12.6 - Semistable Limit cycle. For the system...Ch. 12.6 - Prob. 2ECh. 12.6 - Prob. 3ECh. 12.6 - Prob. 4ECh. 12.6 - In Problems 512, either by hand or using a...Ch. 12.6 - Prob. 6ECh. 12.6 - Prob. 7ECh. 12.6 - Prob. 8ECh. 12.6 - In Problems 5-12, either by hand or using computer...Ch. 12.6 - Prob. 10ECh. 12.6 - Prob. 11ECh. 12.6 - In Problems 5-12, either by hand or using computer...Ch. 12.6 - In Problems 13-18, show that the given system or...Ch. 12.6 - In Problems 13-18, show that the given system or...Ch. 12.6 - Prob. 15ECh. 12.6 - In Problems 13-18, show that the given system or...Ch. 12.6 - Prob. 17ECh. 12.6 - Prob. 18ECh. 12.6 - Prob. 19ECh. 12.6 - Prob. 20ECh. 12.6 - Prob. 21ECh. 12.6 - Prob. 22ECh. 12.6 - Prob. 23ECh. 12.6 - Prob. 24ECh. 12.6 - Prob. 25ECh. 12.6 - Prob. 26ECh. 12.6 - Prob. 27ECh. 12.6 - Prob. 28ECh. 12.7 - Prob. 1ECh. 12.7 - Prob. 2ECh. 12.7 - Prob. 3ECh. 12.7 - Prob. 4ECh. 12.7 - Prob. 5ECh. 12.7 - Prob. 6ECh. 12.7 - Prob. 9ECh. 12.7 - Prob. 10ECh. 12.7 - Prob. 11ECh. 12.7 - Prob. 12ECh. 12.7 - Prob. 13ECh. 12.7 - Prob. 14ECh. 12.7 - Prob. 15ECh. 12.7 - Prob. 16ECh. 12.7 - Prob. 17ECh. 12.7 - Prob. 18ECh. 12.8 - Calculate the Jacobian eigenvalues at the critical...Ch. 12.8 - Prob. 2ECh. 12.8 - Prob. 3ECh. 12.8 - Prob. 4ECh. 12.RP - In Problems 1-6, find all the critical points for...Ch. 12.RP - Prob. 2RPCh. 12.RP - Prob. 3RPCh. 12.RP - Prob. 4RPCh. 12.RP - In Problems 1-6, find all the critical points for...Ch. 12.RP - In Problems 1-6, find all the critical points for...Ch. 12.RP - Prob. 7RPCh. 12.RP - In Problems 7 and 8, use the potential plane to...Ch. 12.RP - In Problems 9-12, use Lyapunovs direct method to...Ch. 12.RP - Prob. 10RPCh. 12.RP - In Problems 9-12, use Lyapunovs direct method to...Ch. 12.RP - Prob. 12RPCh. 12.RP - Prob. 13RPCh. 12.RP - In Problem 13 and 14, sketch the phase plane...Ch. 12.RP - In Problems 15 and 16, determine whether the given...Ch. 12.RP - Prob. 16RPCh. 12.RP - In Problems 17 and 18, determine the stability of...Ch. 12.RP - In Problems 17 and 18, determine the stability of...
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