ALEKS 360 ELEM STATISTICS
ALEKS 360 ELEM STATISTICS
10th Edition
ISBN: 9781264241385
Author: Bluman
Publisher: MCG
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Chapter 12.3, Problem 3E
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To explain: The values for the mean squares computed.

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In 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.
Problem 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…
Problem 1. Multi-stock model We consider a 2-stock model similar to the one studied in class. Namely, we consider = S(1) S(2) = S(¹) exp (σ1B(1) + (M1 - 0/1 ) S(²) exp (02B(2) + (H₂- M2 where (B(¹) ) +20 and (B(2) ) +≥o are two Brownian motions, with t≥0 Cov (B(¹), B(2)) = p min{t, s}. " The purpose of this problem is to prove that there indeed exists a 2-dimensional Brownian motion (W+)+20 (W(1), W(2))+20 such that = S(1) S(2) = = S(¹) exp (011W(¹) + (μ₁ - 01/1) t) 롱) S(²) exp (021W (1) + 022W(2) + (112 - 03/01/12) t). where σ11, 21, 22 are constants to be determined (as functions of σ1, σ2, p). Hint: The constants will follow the formulas developed in the lectures. (a) To show existence of (Ŵ+), first write the expression for both W. (¹) and W (2) functions of (B(1), B(²)). as (b) Using the formulas obtained in (a), show that the process (WA) is actually a 2- dimensional standard Brownian motion (i.e. show that each component is normal, with mean 0, variance t, and that their…

Chapter 12 Solutions

ALEKS 360 ELEM STATISTICS

Ch. 12.1 - For Exercises 7 through 20, assume that all...Ch. 12.1 - Prob. 11ECh. 12.1 - For Exercises 7 through 20, assume that all...Ch. 12.1 - For Exercises 7 through 20, assume that all...Ch. 12.1 - For Exercises 7 through 20, assume that all...Ch. 12.1 - Prob. 15ECh. 12.1 - For Exercises 7 through 20, assume that all...Ch. 12.1 - For Exercises 7 through 20, assume that all...Ch. 12.1 - For Exercises 7 through 20, assume that all...Ch. 12.1 - For Exercises 7 through 20, assume that all...Ch. 12.1 - For Exercises 7 through 20, assume that all...Ch. 12.2 - Colors That Make You Smarter The following set of...Ch. 12.2 - What two tests can be used to compare two means...Ch. 12.2 - Explain the difference between the two tests used...Ch. 12.2 - For Exercises 3 through 8, the null hypothesis was...Ch. 12.2 - For Exercises 3 through 8, the null hypothesis was...Ch. 12.2 - For Exercises 3 through 8, the null hypothesis was...Ch. 12.2 - For Exercises 3 through 8, the null hypothesis was...Ch. 12.2 - For Exercises 3 through 8, the null hypothesis was...Ch. 12.2 - For Exercises 3 through 8, the null hypothesis was...Ch. 12.2 - For Exercises 9 through 13, do a complete one-way...Ch. 12.2 - Prob. 10ECh. 12.2 - For Exercises 9 through 13, do a complete one-way...Ch. 12.2 - For Exercises 9 through 13, do a complete one-way...Ch. 12.2 - Prob. 13ECh. 12.2 - Prob. 14ECh. 12.3 - Automobile Sales Techniques The following outputs...Ch. 12.3 - Prob. 1ECh. 12.3 - Explain what is meant by main effects and...Ch. 12.3 - Prob. 3ECh. 12.3 - How are the F test values computed?Ch. 12.3 - Prob. 5ECh. 12.3 - In a two-way ANOVA, variable A has six levels and...Ch. 12.3 - Prob. 7ECh. 12.3 - When can the main effects for the two-way ANOVA be...Ch. 12.3 - Prob. 9ECh. 12.3 - For Exercises 9 through 15, perform these steps....Ch. 12.3 - For Exercises 9 through 15, perform these steps....Ch. 12.3 - For Exercises 9 through 15, perform these steps....Ch. 12.3 - Prob. 13ECh. 12.3 - For Exercises 9 through 15, perform these steps....Ch. 12.3 - Prob. 15ECh. 12 - If the null hypothesis is rejected in Exercises 1...Ch. 12 - Prob. 12.1.2RECh. 12 - Prob. 12.1.3RECh. 12 - Prob. 12.1.4RECh. 12 - Prob. 12.1.5RECh. 12 - If the null hypothesis is rejected in Exercises 1...Ch. 12 - Prob. 12.1.7RECh. 12 - Prob. 12.1.8RECh. 12 - Review Preparation for Statistics A statistics...Ch. 12 - Effects of Different Types of Diets A medical...Ch. 12 - Prob. 1DACh. 12 - Prob. 2DACh. 12 - Prob. 3DACh. 12 - Prob. 1CQCh. 12 - Prob. 2CQCh. 12 - Prob. 3CQCh. 12 - Determine whether each statement is true or false....Ch. 12 - Prob. 5CQCh. 12 - Prob. 6CQCh. 12 - Prob. 7CQCh. 12 - Prob. 8CQCh. 12 - Complete the following statements with the best...Ch. 12 - Prob. 10CQCh. 12 - For Exercises 11 through 17, use the traditional...Ch. 12 - Prob. 12CQCh. 12 - Prob. 13CQCh. 12 - Prob. 14CQCh. 12 - Prob. 15CQCh. 12 - Prob. 16CQCh. 12 - For Exercises 11 through 17, use the traditional...Ch. 12 - Shown here are the abstract and two tables from a...Ch. 12 - Shown here are the abstract and two tables from a...Ch. 12 - Prob. 3CTCCh. 12 - Prob. 4CTCCh. 12 - Prob. 5CTCCh. 12 - Prob. 6CTCCh. 12 - Prob. 7CTCCh. 12 - Adult Children of Alcoholics Shown here are the...Ch. 12 - Prob. 9CTCCh. 12 - Prob. 10CTCCh. 12 - Prob. 11CTC
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