Mathematics: A Discrete Introduction
3rd Edition
ISBN: 9780840049421
Author: Edward A. Scheinerman
Publisher: Cengage Learning
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Chapter 1.4, Problem 4.6E
(a)
To determine
To find: Whether the statement “
(b)
To determine
To find: Whether the statement “not
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The Course Name Real Analysis please Solve questions by Real Analysis
We consider a 4-dimensional stock price model given (under P) by
dẴ₁ = µ· Xt dt + йt · ΣdŴt
where (W) is an n-dimensional Brownian motion,
π = (0.02, 0.01, -0.02, 0.05),
0.2
0
0
0
0.3
0.4
0
0
Σ=
-0.1
-4a За
0
0.2
0.4 -0.1 0.2)
and a E R. We assume that ☑0 = (1, 1, 1, 1) and that the interest rate on the market is r = 0.02.
(a) Give a condition on a that would make stock #3 be the one with largest volatility.
(b) Find the diversification coefficient for this portfolio as a function of a.
(c) Determine the maximum diversification coefficient d that you could reach by varying the
value of a?
2
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…
Chapter 1 Solutions
Mathematics: A Discrete Introduction
Ch. 1.1 - Simplify the following algebraic expression:...Ch. 1.2 - Prob. 2.1ECh. 1.3 - Prob. 3.1ECh. 1.3 - Prob. 3.2ECh. 1.3 - Prob. 3.3ECh. 1.3 - Prob. 3.4ECh. 1.3 - Prob. 3.5ECh. 1.3 - Prob. 3.6ECh. 1.3 - Prob. 3.7ECh. 1.3 - Prob. 3.8E
Ch. 1.3 - Prob. 3.9ECh. 1.3 - Prob. 3.10ECh. 1.3 - Prob. 3.11ECh. 1.3 - Prob. 3.12ECh. 1.3 - Prob. 3.13ECh. 1.3 - Prob. 3.14ECh. 1.4 - Prob. 4.1ECh. 1.4 - Prob. 4.2ECh. 1.4 - Prob. 4.3ECh. 1.4 - Prob. 4.4ECh. 1.4 - Prob. 4.5ECh. 1.4 - Prob. 4.6ECh. 1.4 - Prob. 4.7ECh. 1.4 - Prob. 4.8ECh. 1.4 - Prob. 4.9ECh. 1.4 - Prob. 4.10ECh. 1.4 - Prob. 4.11ECh. 1.4 - Prob. 4.12ECh. 1.5 - Prove that the sum of two odd integers is even.Ch. 1.5 - Prove that the sum of an odd integer and an even...Ch. 1.5 - Prove that if n is an odd integer, then n is also...Ch. 1.5 - Prove that the product of two even integers is...Ch. 1.5 - Prove that the product of an even integer and an...Ch. 1.5 - Prove that the product of two odd integers is odd.Ch. 1.5 - Prove that the square of an odd integer is odd.Ch. 1.5 - Prove that the cube of an odd integer is odd.Ch. 1.5 - Suppose a, b, and c are integers. Prove that if ab...Ch. 1.5 - Suppose a, b, and c are integers. Prove that if...Ch. 1.5 - Suppose a, b, d, x, and y are integers. Prove that...Ch. 1.5 - Suppose a, b, c, and d are integers. Prove that if...Ch. 1.5 - Let x be an integer. Prove that x is odd if and...Ch. 1.5 - Let x be an integers. Prove that x is odd if and...Ch. 1.5 - Let x be an integer. Prove that 0x if and only if...Ch. 1.5 - Let a and b be integers. Prove that ab if and only...Ch. 1.5 - Let a be a number with a1. Prove that a number x...Ch. 1.5 - Prove that the difference between consecutive...Ch. 1.5 - Let a be a perfect square. Prove that a is the...Ch. 1.5 - For real numbers a and b, prove that if 0ab, then...Ch. 1.5 - Prove that the difference between distinct,...Ch. 1.5 - Prove that an integer is odd if and only if it is...Ch. 1.5 - Suppose you are asked to prove a statement of the...Ch. 1.5 - Suppose you are asked to prove a statement of the...Ch. 1.6 - Disprove: If a and b are integers with ab, then...Ch. 1.6 - Disprove: If a and b are nonnegative integers with...Ch. 1.6 - Disprove: If a, b, and c are positive integers...Ch. 1.6 - Disprove: If a, b, and c are positive integers,...Ch. 1.6 - Disprove: If p and q are prime, then p+q is...Ch. 1.6 - Disprove: If p is prime, then 2p1 is also prime.Ch. 1.6 - Prob. 6.7ECh. 1.6 - An integer is a palindrome if it reads the same...Ch. 1.6 - Prob. 6.9ECh. 1.6 - Prob. 6.10ECh. 1.6 - Prob. 6.11ECh. 1.6 - Prob. 6.12ECh. 1.6 - Prob. 6.13ECh. 1.7 - Prob. 7.1ECh. 1.7 - Prob. 7.2ECh. 1.7 - Prob. 7.3ECh. 1.7 - Prob. 7.4ECh. 1.7 - Prob. 7.5ECh. 1.7 - Prob. 7.6ECh. 1.7 - Prob. 7.7ECh. 1.7 - Prob. 7.8ECh. 1.7 - Prob. 7.9ECh. 1.7 - Prob. 7.10ECh. 1.7 - Prob. 7.11ECh. 1.7 - Prob. 7.12ECh. 1.7 - Prob. 7.13ECh. 1.7 - Prob. 7.14ECh. 1.7 - Prob. 7.15ECh. 1.7 - Prob. 7.16ECh. 1.7 - Prob. 7.17ECh. 1.7 - Prob. 7.18ECh. 1.7 - Prove that xy can be reexpressed in terms of just ...Ch. 1.7 - Prob. 7.20ECh. 1 - Prob. 1STCh. 1 - Prob. 2STCh. 1 - Prob. 3STCh. 1 - Prob. 4STCh. 1 - Prob. 5STCh. 1 - Prob. 6STCh. 1 - Prob. 7STCh. 1 - Prob. 8STCh. 1 - Prob. 9STCh. 1 - Prob. 10STCh. 1 - Prob. 11STCh. 1 - Prob. 12STCh. 1 - Prob. 13STCh. 1 - Prob. 14STCh. 1 - Prob. 15STCh. 1 - Prob. 16STCh. 1 - Prob. 17STCh. 1 - Prob. 18STCh. 1 - Prob. 19STCh. 1 - Prob. 20ST
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