Excursions in Modern Mathematics (9th Edition)
9th Edition
ISBN: 9780134468372
Author: Peter Tannenbaum
Publisher: PEARSON
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Chapter 14, Problem 48E
To determine
To explain:
The conclusion from the given study.
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A
55, 60, 64, 72, 73, 75, 77, 81, 83, 91, 91, 92\ 55,\ 60,\ 64,\ 72,\ 73,\ 75,\ 77,\ 81,\ 83,\ 91,\ 91,\ 92 55, 60, 64, 72, 73, 75, 77, 81, 83, 91, 91, 92
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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.)
Chapter 14 Solutions
Excursions in Modern Mathematics (9th Edition)
Ch. 14 - As part of a sixth-grade class project the teacher...Ch. 14 - As part of a sixth-grade class project the teacher...Ch. 14 - Madison County has a population of 34,522 people....Ch. 14 - Madison County has a population of 34,522 people....Ch. 14 - A big concert was held at the Bowl. Men and women...Ch. 14 - A large jar contains an unknown number of red...Ch. 14 - You want to estimate how many fish there are in a...Ch. 14 - To estimate the population in a rookery, 4965 fur...Ch. 14 - To count whale populations, the capture is done by...Ch. 14 - The critically endangered Mauis dolphin is...
Ch. 14 - Exercises 11 and 12 refer to Chapmans correction....Ch. 14 - Exercises 11 and 12 refer to Chapmans correction....Ch. 14 - Starting in 2004, a study to determine the number...Ch. 14 - Exercises 25 through 28 refer to the following...Ch. 14 - Name the sampling method that best describes each...Ch. 14 - An audit is performed on last years 15, 000...Ch. 14 - Exercise17 through 20 refer to the following...Ch. 14 - Exercise17 through 20 refer to the following...Ch. 14 - Exercise17 through 20 refer to the following...Ch. 14 - Exercise17 through 20 refer to the following...Ch. 14 - Prob. 21ECh. 14 - Prob. 22ECh. 14 - Prob. 23ECh. 14 - Prob. 24ECh. 14 - Exercises 25 through 28 refer to the following...Ch. 14 - Exercises 25 through 28 refer to the following...Ch. 14 - Exercises 25 through 28 refer to the following...Ch. 14 - Exercises 29 and 30 refer to the following story:...Ch. 14 - Exercises 29 and 30 refer to the following story:...Ch. 14 - Prob. 31ECh. 14 - Prob. 32ECh. 14 - Exercises 33 through 36 refer to the following...Ch. 14 - Exercises 33 through 36 refer to the following...Ch. 14 - Exercises 33 through 36 refer to the following...Ch. 14 - Exercises 33 through 36 refer to the following...Ch. 14 - Exercises 37 through 40 refer to a clinical study...Ch. 14 - Exercises 37 through 40 refer to a clinical study...Ch. 14 - Exercises 37 through 40 refer to a clinical study...Ch. 14 - Prob. 40ECh. 14 - Prob. 41ECh. 14 - Exercises 41 through 44 refer to a clinical trial...Ch. 14 - Prob. 43ECh. 14 - Exercises 41 through 44 refer to a clinical trial...Ch. 14 - Prob. 45ECh. 14 - Prob. 46ECh. 14 - Exercises 45 through 48 refer to a study on the...Ch. 14 - Prob. 48ECh. 14 - Exercises 49 through 52 refer to a landmark study...Ch. 14 - Prob. 50ECh. 14 - Exercises 49 through 52 refer to a landmark study...Ch. 14 - Prob. 52ECh. 14 - Exercises 53 through 56 refer to a study conducted...Ch. 14 - Prob. 54ECh. 14 - Exercises53_ through 56_ refer to a study...Ch. 14 - Exercises53 through 56 refer to a study conducted...Ch. 14 - Prob. 57ECh. 14 - Prob. 58ECh. 14 - Exercises 57 through 60 refer to the following...Ch. 14 - Prob. 60ECh. 14 - Prob. 61ECh. 14 - Prob. 62ECh. 14 - Prob. 63ECh. 14 - Prob. 64ECh. 14 - Read the examples of informal surveys given in...Ch. 14 - Leading-question bias. The way the questions in...Ch. 14 - Prob. 67ECh. 14 - Prob. 68ECh. 14 - Prob. 69ECh. 14 - Prob. 70ECh. 14 - Prob. 71ECh. 14 - Prob. 72ECh. 14 - One of the problems with the capture-recapture...Ch. 14 - Darrochs method. is a method for estimating the...
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