Excursions in Modern Mathematics (9th Edition)
9th Edition
ISBN: 9780134468372
Author: Peter Tannenbaum
Publisher: PEARSON
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Chapter 13, Problem 76E
To determine
To prove:
The given statement.
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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.)
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.
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…
Chapter 13 Solutions
Excursions in Modern Mathematics (9th Edition)
Ch. 13 - Compute the value of each of the following. a. F15...Ch. 13 - Compute the value of each of the following. a. F16...Ch. 13 - Prob. 3ECh. 13 - Compute the value of each of the following. a....Ch. 13 - Describe in words what each of the expressions...Ch. 13 - Prob. 6ECh. 13 - Given that F36=14,930,352 and F37=24,157,817, a....Ch. 13 - Prob. 8ECh. 13 - Given that F36=14,930,352 and F37=24,157,817,...Ch. 13 - Given that F32=2,178,309 and F33=3,524,578, a.find...
Ch. 13 - Prob. 11ECh. 13 - Using a good calculator an online calculator if...Ch. 13 - Consider the following sequence of equations...Ch. 13 - Consider the following sequence of equations...Ch. 13 - Fact: If we make a list of any four consecutive...Ch. 13 - Fact: If we make a list of any 10 consecutive...Ch. 13 - Express each of the following as a single...Ch. 13 - Prob. 18ECh. 13 - Prob. 19ECh. 13 - Prob. 20ECh. 13 - Prob. 21ECh. 13 - Prob. 22ECh. 13 - Prob. 23ECh. 13 - Prob. 24ECh. 13 - Consider the quadratic equation x2=x+1. a. Use the...Ch. 13 - Prob. 26ECh. 13 - Consider the quadratic equation 3x2=8x+5. a. Use...Ch. 13 - Prob. 28ECh. 13 - Prob. 29ECh. 13 - Prob. 30ECh. 13 - Consider the quadratic equation 21x2=34x+55. a....Ch. 13 - Prob. 32ECh. 13 - Prob. 33ECh. 13 - Consider the quadratic equation (FN2)x2=(FN1)x+FN,...Ch. 13 - The reciprocal of =1+52 is the rational number...Ch. 13 - The square of the golden ratio is the irrational...Ch. 13 - Given that F4998.61710103, a. find an approximate...Ch. 13 - Prob. 38ECh. 13 - Prob. 39ECh. 13 - Prob. 40ECh. 13 - Prob. 41ECh. 13 - Prob. 42ECh. 13 - Triangles T and T shown in Fig. 13-23 are similar...Ch. 13 - Polygons P and P shown in Fig. 13-24 are similar...Ch. 13 - Find the value of x so that the shaded rectangle...Ch. 13 - Find the value of x so that the shaded figure in...Ch. 13 - Prob. 47ECh. 13 - Prob. 48ECh. 13 - Prob. 49ECh. 13 - Prob. 50ECh. 13 - In Fig. 13-31 triangles BCA is a 36-36-108...Ch. 13 - Prob. 52ECh. 13 - Find the value of x of y so that in Fig. 13-33 the...Ch. 13 - Prob. 54ECh. 13 - Prob. 55ECh. 13 - Consider the sequence of ratios FN2FN. a. Using a...Ch. 13 - Prob. 57ECh. 13 - Prob. 58ECh. 13 - Prob. 59ECh. 13 - a.Explain what happens to the values of (152)N as...Ch. 13 - Prob. 61ECh. 13 - Prob. 62ECh. 13 - Prob. 63ECh. 13 - Prob. 64ECh. 13 - Prob. 65ECh. 13 - Find the value of x of y so that in Fig. 13-37 the...Ch. 13 - Prob. 67ECh. 13 - In Fig. 13-39 triangle BCD is a 727236 triangle...Ch. 13 - Prob. 69ECh. 13 - Prob. 70ECh. 13 - Prob. 71ECh. 13 - Prob. 72ECh. 13 - Prob. 73ECh. 13 - Prob. 74ECh. 13 - Prob. 75ECh. 13 - Prob. 76ECh. 13 - During the time of the Greeks the star pentagram...
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