SURVEY OF MATHEMATICS - 24 MONTH MML CO
10th Edition
ISBN: 9780135835210
Author: Angel
Publisher: PEARSON
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Chapter 13.1, Problem 20E
To determine
Whether there is a circuit that includes all vertices, other than the beginning and ending vertex, exactly one time; if it is possible then determine such a circuit.
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We consider an N-period CRR model where each period is 1 year (At = 1), the up factor is
u = 0.1, the down factor is d = e−0.3 and r = 0. We remind you that in the CRR model, the
stock price at time tn is modeled (under P) by
Sta
=
So exp (μtn + σ√AtZn),
where (Zn) is a simple symmetric random walk.
(a) Find the parameters μ and σ for the CRR model described above.
(b) Find P
Ste
So
55/50
€ > 1).
StN
(c) Find lim P
804-N
(d) Determine q. (You can use e- 1 x.)
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004-N
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So
In this problem, we consider a 3-period stock market model with evolution given in Fig. 1 below.
Each period corresponds to one year. The interest rate is r = 0%.
16
22
28
12
16
12
8
4
2
time
Figure 1: Stock evolution for Problem 1.
(a) A colleague notices that in the model above, a movement up-down leads to the same value
as a movement down-up. He concludes that the model is a CRR model. Is your colleague
correct? (Explain your answer.)
(b) We consider a European put with strike price K = 10 and expiration T = 3 years. Find
the price of this option at time 0. Provide the replicating portfolio for the first period.
(c) In addition to the call above, we also consider a European call with strike price K = 10
and expiration T = 3 years. Which one has the highest price? (It is not necessary to
provide the price of the call.)
(d) We now assume a yearly interest rate r = 25%. We consider a Bermudan put option with
strike price K = 10. It works like a standard put, but you can exercise it…
In this problem, we consider a 2-period stock market model with evolution given in Fig. 1 below.
Each period corresponds to one year (At = 1). The yearly interest rate is r = 1/3 = 33%. This
model is a CRR model.
25
15
9
10
6
4
time
Figure 1: Stock evolution for Problem 1.
(a) Find the values of up and down factors u and d, and the risk-neutral probability q.
(b) We consider a European put with strike price K
the price of this option at time 0.
==
16 and expiration T = 2 years. Find
(c) Provide the number of shares of stock that the replicating portfolio contains at each pos-
sible position.
(d) You find this option available on the market for $2. What do you do? (Short answer.)
(e) We consider an American put with strike price K
= 16 and expiration T
=
2 years. Find
the price of this option at time 0 and describe the optimal exercising strategy.
(f) We consider an American call with strike price K ○ = 16 and expiration T = 2 years. Find
the price of this option at time 0 and describe…
Chapter 13 Solutions
SURVEY OF MATHEMATICS - 24 MONTH MML CO
Ch. 13.1 - In Exercises 1-8, fill in the blanks with an...Ch. 13.1 - In Exercises 1-8, fill in the blanks with an...Ch. 13.1 - In Exercises 1-8, fill in the blanks with an...Ch. 13.1 - In Exercises 1-8, fill in the blanks with an...Ch. 13.1 - Prob. 5ECh. 13.1 - In Exercises 1-8, fill in the blanks with an...Ch. 13.1 - Prob. 7ECh. 13.1 - Prob. 8ECh. 13.1 - In Exercises 9-14, create a graph with the given...Ch. 13.1 - In Exercises 9-14, create a graph with the given...
Ch. 13.1 - In Exercises 9-14, create a graph with the given...Ch. 13.1 - In Exercises 9-14, create a graph with the given...Ch. 13.1 - In Exercises 9-14, create a graph with the given...Ch. 13.1 - Prob. 14ECh. 13.1 - In Exercises 15-20, use the graph below to answer...Ch. 13.1 - In Exercises 15-20, use the graph below to answer...Ch. 13.1 - In Exercises 15-20, use the graph below to answer...Ch. 13.1 - In Exercises 15-20, use the graph below to answer...Ch. 13.1 - In Exercises 15-20, use the graph below to answer...Ch. 13.1 - Prob. 20ECh. 13.1 - Modified Knigsberg Bridge Problems In Exercises 21...Ch. 13.1 - Prob. 22ECh. 13.1 - Other Navy Regions In Exercises 23 and 24, the...Ch. 13.1 - Prob. 24ECh. 13.1 - Central America The map below shows the countries...Ch. 13.1 - Northern Africa The map below shows the countries...Ch. 13.1 - For Exercises 27-30, use a graph to represent the...Ch. 13.1 - Prob. 28ECh. 13.1 - Prob. 29ECh. 13.1 - For Exercises 27-30, use a graph to represent the...Ch. 13.1 - Representing a Neighborhood The map of the Tree...Ch. 13.1 - Prob. 32ECh. 13.1 - In Exercises 33-36, determine whether the graph...Ch. 13.1 - Prob. 34ECh. 13.1 - Prob. 35ECh. 13.1 - Prob. 36ECh. 13.1 - In Exercises 37-40, a connected graph is shown....Ch. 13.1 - Prob. 38ECh. 13.1 - In Exercises 37-40, a connected graph is shown....Ch. 13.1 - Prob. 40ECh. 13.1 - Poll your entire class to determine which students...Ch. 13.1 - Attempt to draw a graph that has an odd number of...Ch. 13.1 - Draw four different graphs and then for each...Ch. 13.1 - Facebook Friends Read the Recreational Mathematics...Ch. 13.1 - Use a graph to represent a. the floor plan of your...Ch. 13.2 - In Exercises 1-6, fill in the blanks with an...Ch. 13.2 - In Exercises 1-6, fill in the blanks with an...Ch. 13.2 - In Exercises 1-6, fill in the blanks with an...Ch. 13.2 - In Exercises 1-6, fill in the blanks with an...Ch. 13.2 - In Exercises 1-6, fill in the blanks with an...Ch. 13.2 - In Exercises 1-6, fill in the blanks with an...Ch. 13.2 - For Exercises 7-10, use the following graph. 7....Ch. 13.2 - Prob. 8ECh. 13.2 - For Exercises 7-10, use the following graph. 9 Is...Ch. 13.2 - Prob. 10ECh. 13.2 - For Exercises 11-14, use the following graph. 11....Ch. 13.2 - Prob. 12ECh. 13.2 - For Exercises 11-14, use the following graph. 13....Ch. 13.2 - Prob. 14ECh. 13.2 - For Exercises 15-20, use the following graph. 15....Ch. 13.2 - Prob. 16ECh. 13.2 - For Exercises 15-20, use the following graph. 17...Ch. 13.2 - Prob. 18ECh. 13.2 - For Exercises 15-20, use the following graph. 19...Ch. 13.2 - For Exercises 15-20, use the following graph. 20...Ch. 13.2 - Prob. 21ECh. 13.2 - Revisiting the Knigsberg Bridge Problem In...Ch. 13.2 - Prob. 23ECh. 13.2 - Other Navy Regions In Exercises 23 and 24, the...Ch. 13.2 - Areas of the World In Exercises 25-28 use each map...Ch. 13.2 - Prob. 26ECh. 13.2 - Prob. 27ECh. 13.2 - Prob. 28ECh. 13.2 - Locking Doors Recall Joe from Example 5 on page...Ch. 13.2 - Prob. 30ECh. 13.2 - Prob. 31ECh. 13.2 - Locking Doors Recall Joe from Example 5 on page...Ch. 13.2 - Prob. 33ECh. 13.2 - Prob. 34ECh. 13.2 - In Exercises 35-38, use Fleurys algorithm to...Ch. 13.2 - Prob. 36ECh. 13.2 - Prob. 37ECh. 13.2 - Prob. 38ECh. 13.2 - In Exercises 39-44, use Fleurys algorithm to...Ch. 13.2 - Prob. 40ECh. 13.2 - In Exercises 39-44, use Fleurys algorithm to...Ch. 13.2 - Prob. 42ECh. 13.2 - Prob. 43ECh. 13.2 - Prob. 44ECh. 13.2 - Prob. 45ECh. 13.2 - Prob. 46ECh. 13.2 - Determine an Euler circuit for the Country Oaks...Ch. 13.2 - Prob. 48ECh. 13.2 - Prob. 49ECh. 13.2 - Prob. 50ECh. 13.2 - Imagine a very large connected graph that has 400...Ch. 13.2 - Prob. 52ECh. 13.2 - Imagine a very large connected graph that has 400...Ch. 13.2 - Prob. 54ECh. 13.2 - Prob. 56ECh. 13.2 - Prob. 57ECh. 13.3 - In Exercises 1-8, fill in the blanks with an...Ch. 13.3 - In Exercises 1-8, fill in the blanks with an...Ch. 13.3 - In Exercises 1-8, fill in the blanks with an...Ch. 13.3 - In Exercises 1-8, fill in the blanks with an...Ch. 13.3 - In Exercises 1-8, fill in the blanks with an...Ch. 13.3 - In Exercises 1-8, fill in the blanks with an...Ch. 13.3 - In Exercises 1-8, fill in the blanks with an...Ch. 13.3 - In Exercises 1-8, fill in the blanks with an...Ch. 13.3 - In Exercises 9-14, determine two different...Ch. 13.3 - In Exercises 9-14, determine two different...Ch. 13.3 - In Exercises 9-14, determine two different...Ch. 13.3 - In Exercises 9-14, determine two different...Ch. 13.3 - In Exercises 9-14, determine two different...Ch. 13.3 - Prob. 14ECh. 13.3 - In Exercises 15-18, determine two different...Ch. 13.3 - In Exercises 15-18, determine two different...Ch. 13.3 - In Exercises 15-18, determine two different...Ch. 13.3 - Prob. 18ECh. 13.3 - Draw a complete graph with four vertices.Ch. 13.3 - Prob. 20ECh. 13.3 - College Visits Nick is a high school student who...Ch. 13.3 - Prob. 22ECh. 13.3 - Inspecting Weigh Stations Sally lives in...Ch. 13.3 - Prob. 24ECh. 13.3 - Running Errands on Campus Mary needs to run...Ch. 13.3 - Prob. 26ECh. 13.3 - A Family Vacation The Ackermans live in...Ch. 13.3 - Prob. 28ECh. 13.3 - Package Delivery Laurice works for FedEx and is in...Ch. 13.3 - Basketball Teams Jasmine lives in Elko, Nevada...Ch. 13.3 - Prob. 31ECh. 13.3 - Cranberry Plants Altay lives in Boston,...Ch. 13.3 - Prob. 33ECh. 13.3 - Prob. 34ECh. 13.3 - Prob. 35ECh. 13.4 - In Exercises 1-6, fill in the blanks with an...Ch. 13.4 - Prob. 2ECh. 13.4 - Prob. 3ECh. 13.4 - Prob. 4ECh. 13.4 - Prob. 5ECh. 13.4 - Prob. 6ECh. 13.4 - A Family Tree Use a tree to show the parent-child...Ch. 13.4 - Prob. 8ECh. 13.4 - Corporate Structure Use a tree to show the...Ch. 13.4 - Prob. 10ECh. 13.4 - Prob. 11ECh. 13.4 - Prob. 12ECh. 13.4 - Prob. 13ECh. 13.4 - Prob. 14ECh. 13.4 - Prob. 15ECh. 13.4 - Prob. 16ECh. 13.4 - Prob. 17ECh. 13.4 - Prob. 18ECh. 13.4 - Prob. 19ECh. 13.4 - Prob. 20ECh. 13.4 - Prob. 21ECh. 13.4 - Prob. 22ECh. 13.4 - Prob. 23ECh. 13.4 - Prob. 24ECh. 13.4 - Prob. 25ECh. 13.4 - Prob. 26ECh. 13.4 - Prob. 27ECh. 13.4 - Prob. 28ECh. 13.4 - Prob. 29ECh. 13.4 - Prob. 30ECh. 13.4 - Prob. 31ECh. 13.4 - Prob. 32ECh. 13.4 - Prob. 33ECh. 13.4 - College Structure Create a tree that shows the...Ch. 13.4 - Prob. 35ECh. 13 - In Exercises 1 and 2, create a graph with the...Ch. 13 - Prob. 2RECh. 13 - In Exercises 3 and 4, use the following graph 3....Ch. 13 - Prob. 4RECh. 13 - Prob. 5RECh. 13 - School Floor Plan The drawing below shows the...Ch. 13 - Prob. 7RECh. 13 - Prob. 8RECh. 13 - Prob. 9RECh. 13 - Prob. 10RECh. 13 - Prob. 11RECh. 13 - Prob. 12RECh. 13 - Prob. 13RECh. 13 - Prob. 14RECh. 13 - a. The drawing below shows the floor plan of a...Ch. 13 - Prob. 16RECh. 13 - Prob. 17RECh. 13 - Use Fleury's algorithm to determine an Euler...Ch. 13 - Prob. 19RECh. 13 - Prob. 20RECh. 13 - Prob. 21RECh. 13 - Prob. 22RECh. 13 - Prob. 23RECh. 13 - Visiting Sales Offices Jennifer is the sales...Ch. 13 - Prob. 25RECh. 13 - Prob. 26RECh. 13 - Prob. 27RECh. 13 - Prob. 28RECh. 13 - Prob. 1TCh. 13 - Prob. 2TCh. 13 - Prob. 3TCh. 13 - Prob. 4TCh. 13 - Prob. 5TCh. 13 - Prob. 6TCh. 13 - Prob. 7TCh. 13 - Use Fleurys algorithm to determine an Euler...Ch. 13 - Prob. 9TCh. 13 - Prob. 10TCh. 13 - Prob. 11TCh. 13 - Prob. 12TCh. 13 - Prob. 13TCh. 13 - Prob. 14TCh. 13 - Prob. 15TCh. 13 - Prob. 16TCh. 13 - Prob. 17TCh. 13 - Prob. 18TCh. 13 - Prob. 19TCh. 13 - Prob. 20T
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