Using & Understanding Mathematics: A Quantitative Reasoning Approach (7th Edition)
7th Edition
ISBN: 9780134715919
Author: Bennett
Publisher: PEARSON
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Chapter 12.B, Problem 2E
To determine
What is Arrow’s impossibility theorem? Summarize its meaning and its importance.
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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.)
3. Consider the polynomial equation 6-iz+7z² - iz³ +z = 0 for which the roots are 3i, -2i, -i,
and i.
(a) Verify the relations between this roots and the coefficients of the polynomial.
(b) Find the annulus region in which the roots lie.
Chapter 12 Solutions
Using & Understanding Mathematics: A Quantitative Reasoning Approach (7th Edition)
Ch. 12.A - Prob. 1QQCh. 12.A - Prob. 2QQCh. 12.A - Prob. 3QQCh. 12.A - Prob. 4QQCh. 12.A - Prob. 5QQCh. 12.A - Prob. 6QQCh. 12.A - Prob. 7QQCh. 12.A - Prob. 8QQCh. 12.A - 9. Study Table 12.5. Which candidate received the...Ch. 12.A - 10. What is the primary lesson of the preference...
Ch. 12.A - 1. What is majority rule? When can it definitively...Ch. 12.A - Prob. 2ECh. 12.A - What is a filibuster? What percentage of the vote...Ch. 12.A - Prob. 4ECh. 12.A - Prob. 5ECh. 12.A - Prob. 6ECh. 12.A - Prob. 7ECh. 12.A - Prob. 8ECh. 12.A - Prob. 9ECh. 12.A - Prob. 10ECh. 12.A - 11. Herman won a plurality of the vote, but Hanna...Ch. 12.A - Fred beat Fran using the point system (Borda...Ch. 12.A - 13. Candidate Reagan won the popular vote for the...Ch. 12.A - Prob. 14ECh. 12.A - Prob. 15ECh. 12.A - Prob. 16ECh. 12.A - Prob. 17ECh. 12.A - Prob. 18ECh. 12.A - Prob. 19ECh. 12.A - Presidential Elections. The following tables give...Ch. 12.A - Prob. 21ECh. 12.A - Prob. 22ECh. 12.A - Prob. 23ECh. 12.A - Presidential Elections. The following tables give...Ch. 12.A - 23. Super Majorities.
a. Of the 100 senators in...Ch. 12.A - 24. Super Majorities.
a. According to the bylaws...Ch. 12.A - Prob. 27ECh. 12.A - Prob. 28ECh. 12.A - Prob. 29ECh. 12.A - Prob. 30ECh. 12.A - Prob. 31ECh. 12.A - Prob. 32ECh. 12.A - 31—34. Interpreting Preference Schedules. Answer...Ch. 12.A - 31—34. Interpreting Preference Schedules. Answer...Ch. 12.A - 31—34. Interpreting Preference Schedules. Answer...Ch. 12.A - Prob. 36ECh. 12.A - Prob. 37ECh. 12.A - Prob. 38ECh. 12.A - Prob. 39ECh. 12.A - Prob. 40ECh. 12.A - Prob. 41ECh. 12.A - How Close Was 2016? Consider Table 12.3 which...Ch. 12.A - Prob. 43ECh. 12.A - Prob. 44ECh. 12.A - Prob. 45ECh. 12.A - Prob. 46ECh. 12.A - Condorcet Winner. If a candidate wins all...Ch. 12.A - 45. Condorcet Paradox. Consider the following...Ch. 12.A - 46. Pairwise Comparisons Question.
a. How many...Ch. 12.A - Prob. 50ECh. 12.A - Prob. 51ECh. 12.A - Prob. 52ECh. 12.A - Prob. 53ECh. 12.A - Prob. 54ECh. 12.A - Sports Polls. Most men’s and women’s major college...Ch. 12.A - Elections Around the World. Many countries have...Ch. 12.B - l. How many of the four fairness criteria (see p....Ch. 12.B - Prob. 2QQCh. 12.B - Prob. 3QQCh. 12.B - Prob. 4QQCh. 12.B -
5. Suppose that Berman is declared the winner of...Ch. 12.B - 6. Suppose that Freedman is declared the winner of...Ch. 12.B - 7. Notice that if Goldsmith dropped out, Freedman...Ch. 12.B - Prob. 8QQCh. 12.B - Which of the following is not an advantage of...Ch. 12.B - Prob. 10QQCh. 12.B - Briefly summarize each of the four fairness...Ch. 12.B - Prob. 2ECh. 12.B - What is approval voting? How is it different from...Ch. 12.B - Prob. 4ECh. 12.B - Prob. 5ECh. 12.B - Prob. 6ECh. 12.B - Prob. 7ECh. 12.B - Prob. 8ECh. 12.B - Plurality and Criterion 1. Explain in words why...Ch. 12.B - 10. Plurality and Criterion 2. Consider the...Ch. 12.B - 11. Plurality and Criterion 2. Devise a preference...Ch. 12.B - Prob. 12ECh. 12.B - Plurality and Criterion 4. Suppose the plurality...Ch. 12.B - Prob. 14ECh. 12.B - Runoff Methods and Criterion 1. Explain in words...Ch. 12.B - Prob. 16ECh. 12.B - Prob. 17ECh. 12.B - Sequential Runoff and Criterion 2. Devise a...Ch. 12.B - Prob. 19ECh. 12.B - Prob. 20ECh. 12.B - Prob. 21ECh. 12.B - Prob. 22ECh. 12.B - Point System and Criterion 1. Devise your own...Ch. 12.B - 24. Point System and Criterion 2. Suppose the...Ch. 12.B - 25. Point System and Criterion 2. Devise a...Ch. 12.B - Prob. 26ECh. 12.B - Prob. 27ECh. 12.B - Prob. 28ECh. 12.B - Prob. 29ECh. 12.B - Prob. 30ECh. 12.B - Prob. 31ECh. 12.B - Pairwise Comparisons and Criterion 4. Suppose the...Ch. 12.B - Prob. 33ECh. 12.B - Approval Voting. Suppose that Candidates A and B...Ch. 12.B - Prob. 35ECh. 12.B - Power Voting. Imagine that a small company has...Ch. 12.B - 37-41: Electoral Power. Use the table below to...Ch. 12.B - 37-41: Electoral Power. Use the table below to...Ch. 12.B - Prob. 39ECh. 12.B - Prob. 40ECh. 12.B - Prob. 41ECh. 12.B - Prob. 42ECh. 12.B - Prob. 43ECh. 12.B - Prob. 44ECh. 12.B - Prob. 45ECh. 12.B - Prob. 46ECh. 12.B - Prob. 47ECh. 12.B - Prob. 48ECh. 12.B - Prob. 49ECh. 12.B - Prob. 50ECh. 12.B - Prob. 51ECh. 12.B - 52. Swing Votes. Suppose that the following...Ch. 12.B - Prob. 53ECh. 12.B - Other Fairness Criteria. The fairness criteria...Ch. 12.B - Prob. 55ECh. 12.B - Power Voting and Coalitions. Use the Web...Ch. 12.B - General Voting Power. Find the news report about...Ch. 12.B - Prob. 58ECh. 12.C - Prob. 1QQCh. 12.C - Prob. 2QQCh. 12.C - Prob. 3QQCh. 12.C - 4. Suppose that, in 2030, the census shows that...Ch. 12.C - 5. Consider a school district with 50 schools,...Ch. 12.C - 6. Consider the school district described in...Ch. 12.C - Prob. 7QQCh. 12.C - Prob. 8QQCh. 12.C - Prob. 9QQCh. 12.C - Prob. 10QQCh. 12.C - Prob. 1ECh. 12.C - Prob. 2ECh. 12.C - Prob. 3ECh. 12.C - What is the Alabama paradox? What other paradoxes...Ch. 12.C - Prob. 5ECh. 12.C - What is the quota criterion? Why are violations of...Ch. 12.C - 7. Briefly describe how Webster’s method and the...Ch. 12.C - 8. Explain why Webster’s method and the...Ch. 12.C - is the president of a large company with 12...Ch. 12.C - 10. Charlene is the head judge in a figure skating...Ch. 12.C - Prob. 11ECh. 12.C - Prob. 12ECh. 12.C - Prob. 13ECh. 12.C - Prob. 14ECh. 12.C - Prob. 15ECh. 12.C - Prob. 16ECh. 12.C - Prob. 17ECh. 12.C - 15-18: State Representation. The following table...Ch. 12.C - 19. Standard Quotas in Business. A large company...Ch. 12.C - 20. Standard Quota in Education. Capital...Ch. 12.C - Prob. 21ECh. 12.C - Prob. 22ECh. 12.C - Prob. 23ECh. 12.C - Prob. 24ECh. 12.C - Prob. 25ECh. 12.C - Prob. 26ECh. 12.C - Prob. 27ECh. 12.C - Prob. 28ECh. 12.C - Prob. 29ECh. 12.C - Prob. 30ECh. 12.C - 29-32: Jefferson's Method. Apply Jefferson's...Ch. 12.C - Jefferson's Method. Apply Jefferson's method to...Ch. 12.C - 33. Webster’s Method. Use Webster’s method to...Ch. 12.C - 34. Webster’s Method. Use Webster’s method to...Ch. 12.C - Prob. 35ECh. 12.C - Prob. 36ECh. 12.C - Prob. 37ECh. 12.C - Prob. 38ECh. 12.C - Comparing Methods. Assume 100 delegates are to be...Ch. 12.C - Prob. 40ECh. 12.C - Prob. 41ECh. 12.C - 39-42: Comparing Methods. Assume 100 delegates are...Ch. 12.C - 43-46: Non-House Apportionments. The following...Ch. 12.C - 43-46: Non-House Apportionments. The following...Ch. 12.C - 43-46: Non-House Apportionments. The following...Ch. 12.C - Prob. 46ECh. 12.C - Prob. 47ECh. 12.C - Prob. 48ECh. 12.C - Prob. 49ECh. 12.D - Prob. 1QQCh. 12.D - Prob. 2QQCh. 12.D - 3. If we compare results in presidential elections...Ch. 12.D - 4. In 2010, Republicans in North Carolina received...Ch. 12.D - Prob. 5QQCh. 12.D - Prob. 6QQCh. 12.D - Prob. 7QQCh. 12.D - Prob. 8QQCh. 12.D - Prob. 9QQCh. 12.D - Prob. 10QQCh. 12.D - What is redistricting, and when must it be done?Ch. 12.D - 2. How has the competitiveness of elections for...Ch. 12.D - 3. What is gerrymandering? Where does this term...Ch. 12.D - 4. Briefly describe how the drawing of boundaries...Ch. 12.D - What requirements must be met in drawing district...Ch. 12.D - Briefly describe two ideas for reforming the...Ch. 12.D - In the last election in my home state, 48% of the...Ch. 12.D - Prob. 8ECh. 12.D - Polls show that half voters in our state plan to...Ch. 12.D - Prob. 10ECh. 12.D - Prob. 11ECh. 12.D - Prob. 12ECh. 12.D - Redistricting and House Elections. The 2010 census...Ch. 12.D - Prob. 14ECh. 12.D - Redistricting and House Elections. The 2010 census...Ch. 12.D - 13-17: Redistricting and House Elections. The 2010...Ch. 12.D - Redistricting and House Elections. The 2010 census...Ch. 12.D -
18-23: Average and Extreme Districts. Consider...Ch. 12.D - Prob. 19ECh. 12.D - Prob. 20ECh. 12.D - 18—23: Average and Extreme Districts. Consider the...Ch. 12.D - Average and Extreme Districts. Consider the...Ch. 12.D - Prob. 23ECh. 12.D - Prob. 24ECh. 12.D - Prob. 25ECh. 12.D - Prob. 26ECh. 12.D - Prob. 27ECh. 12.D - Prob. 28ECh. 12.D - 28—29: Drawing Districts Set III. Refer to Figure...Ch. 12.D - 30—32: Drawing Districts Set IV. Refer to Figure...Ch. 12.D - 30—32: Drawing Districts Set IV. Refer to Figure...Ch. 12.D - Prob. 32ECh. 12.D - Prob. 33ECh. 12.D - Prob. 34ECh. 12.D - Prob. 35ECh. 12.D - Prob. 36ECh. 12.D - Prob. 37ECh. 12.D - Prob. 38ECh. 12.D - Prob. 39ECh. 12.D - Prob. 40ECh. 12.D - Prob. 41ECh. 12.D - 42. Redistricting Procedures. Choose a state that...Ch. 12.D - 43. Reform Efforts. Investigate the current status...Ch. 12.D - 44. Mathematical Algorithms for Reform. Search for...Ch. 12.D - Prob. 45E
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