Introductory Statistics
3rd Edition
ISBN: 9780135188927
Author: Gould, Robert, Ryan, Colleen N. (colleen Nooter)
Publisher: Pearson,
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Chapter 14, Problem 11SE
Salaries Figure A shows a
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Question 5. We consider a put option with strike price K and expiration T. This option is
priced using a 1-period CRR model. We consider r > 0, and σ > 0 very large. What is the
approximate price of the option? In other words, what is the limit of the price of the option as
σ∞. (Briefly justify your answer.)
Question 6. You collect daily data for the stock of a company Z over the past 4 months (i.e. 80
days) and calculate the log-returns (yk)/(-1. You want to build a CRR model for the evolution
of the stock. The expected value and standard deviation of the log-returns are y = 0.06 and
Sy 0.1. The money market interest rate is r = 0.04. Determine the risk-neutral probability of
the model.
Several markets (Japan, Switzerland) introduced negative interest rates on their money market.
In this problem, we will consider an annual interest rate r < 0. We consider a stock modeled
by an N-period CRR model where each period is 1 year (At = 1) and the up and down factors
are u and d.
(a) We consider an American put option with strike price K and expiration T. Prove that if
<0, the optimal strategy is to wait until expiration T to exercise.
Chapter 14 Solutions
Introductory Statistics
Ch. 14 - Predicting Test Scores A professor tells his class...Ch. 14 - Used-Car Values A student wishes to buy a used...Ch. 14 - Height and Age (Example 1) A doctor says he can...Ch. 14 - Units and Semesters The registrar at a small...Ch. 14 - Prob. 5SECh. 14 - Prob. 6SECh. 14 - Prob. 7SECh. 14 - Prob. 8SECh. 14 - Semesters and Credits (Example 4) Figure A shows a...Ch. 14 - Prob. 10SE
Ch. 14 - Salaries Figure A shows a scatterplot of the...Ch. 14 - Prob. 12SECh. 14 - Wages of Twins Figure A shows a scatterplot of...Ch. 14 - Simulated Data Figure A shows a scatterplot of...Ch. 14 - Prob. 15SECh. 14 - Movie Budgets Do movies with bigger budgets tend...Ch. 14 - Education of Parents (Example 7) Each of 29...Ch. 14 - Education of Parents Refer to exercise 14.17 and...Ch. 14 - Student and Parent Heights A random sample of 29...Ch. 14 - Trash The weight of trash (in pounds) produced by...Ch. 14 - Prob. 21SECh. 14 - Prob. 22SECh. 14 - Trash and Confidence Intervals The output provided...Ch. 14 - Movie Budgets In exercise 14.16 you examined the...Ch. 14 - Predicted GPA A student who has been accepted by...Ch. 14 - Used BMWs A used-car dealer is purchasing 50 used...Ch. 14 - Predicted Height (Example 9) A mother wants to...Ch. 14 - Predicted GPA A dean of students at a college...Ch. 14 - Loggers A logging company has the diameter of each...Ch. 14 - Prob. 30SECh. 14 - House Prices (Example 10) Figure A contains the...Ch. 14 - Math SAT Score and GPA Figure A shows information...Ch. 14 - Height and Weight A scatterplot of the heights and...Ch. 14 - Waist Size and Weight A scatterplot of the waist...Ch. 14 - GPA and SAT The figure shows 95#37; prediction...Ch. 14 - Shoes and Heights The scatterplot shows shoe size...Ch. 14 - Height and Weight A scatterplot of the heights and...Ch. 14 - Waist Size and Weight A scatterplot of the waist...Ch. 14 - Baseball Players Figure A shows a scatterplot with...Ch. 14 - Predicting Education Figure A shows a scatterplot...Ch. 14 - Life Expectancy and Gestation Periods for Animals...Ch. 14 - Prob. 42CRE
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