Introduction to the Practice of Statistics
Introduction to the Practice of Statistics
9th Edition
ISBN: 9781319013387
Author: David S. Moore, George P. McCabe, Bruce A. Craig
Publisher: W. H. Freeman
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Chapter 1.4, Problem 95UYK
To determine

To find: The z-score for a student who received a score of 350.

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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.)
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Chapter 1 Solutions

Introduction to the Practice of Statistics

Ch. 1.1 - Prob. 11ECh. 1.1 - Prob. 12ECh. 1.1 - Prob. 13ECh. 1.1 - Prob. 14ECh. 1.1 - Prob. 15ECh. 1.2 - Prob. 16UYKCh. 1.2 - Prob. 17UYKCh. 1.2 - Prob. 18UYKCh. 1.2 - Prob. 19UYKCh. 1.2 - Prob. 20UYKCh. 1.2 - Prob. 21UYKCh. 1.2 - Prob. 22UYKCh. 1.2 - Prob. 23UYKCh. 1.2 - Prob. 24UYKCh. 1.2 - Prob. 25ECh. 1.2 - Prob. 26ECh. 1.2 - Prob. 27ECh. 1.2 - Prob. 28ECh. 1.2 - Prob. 29ECh. 1.2 - Prob. 30ECh. 1.2 - Prob. 31ECh. 1.2 - Prob. 32ECh. 1.2 - Prob. 33ECh. 1.2 - Prob. 34ECh. 1.2 - Prob. 35ECh. 1.2 - Prob. 36ECh. 1.2 - Prob. 37ECh. 1.2 - Prob. 38ECh. 1.2 - Prob. 39ECh. 1.2 - Prob. 40ECh. 1.2 - Prob. 41ECh. 1.2 - Prob. 42ECh. 1.3 - Prob. 43UYKCh. 1.3 - Prob. 44UYKCh. 1.3 - Prob. 45UYKCh. 1.3 - Prob. 46UYKCh. 1.3 - Prob. 47UYKCh. 1.3 - Prob. 48UYKCh. 1.3 - Prob. 49UYKCh. 1.3 - Prob. 50UYKCh. 1.3 - Prob. 51UYKCh. 1.3 - Prob. 52UYKCh. 1.3 - Prob. 53UYKCh. 1.3 - Prob. 54UYKCh. 1.3 - Prob. 55UYKCh. 1.3 - Prob. 56UYKCh. 1.3 - Prob. 57ECh. 1.3 - Prob. 58ECh. 1.3 - Prob. 59ECh. 1.3 - Prob. 60ECh. 1.3 - Prob. 61ECh. 1.3 - Prob. 62ECh. 1.3 - Prob. 63ECh. 1.3 - Prob. 64ECh. 1.3 - Prob. 65ECh. 1.3 - Prob. 66ECh. 1.3 - Prob. 67ECh. 1.3 - Prob. 68ECh. 1.3 - Prob. 69ECh. 1.3 - Prob. 70ECh. 1.3 - Prob. 71ECh. 1.3 - Prob. 72ECh. 1.3 - Prob. 73ECh. 1.3 - Prob. 74ECh. 1.3 - Prob. 75ECh. 1.3 - Prob. 76ECh. 1.3 - Prob. 77ECh. 1.3 - Prob. 78ECh. 1.3 - Prob. 79ECh. 1.3 - Prob. 80ECh. 1.3 - Prob. 81ECh. 1.3 - Prob. 82ECh. 1.3 - Prob. 83ECh. 1.3 - Prob. 84ECh. 1.3 - Prob. 85ECh. 1.3 - Prob. 86ECh. 1.3 - Prob. 87ECh. 1.3 - Prob. 88ECh. 1.3 - Prob. 89ECh. 1.3 - Prob. 90ECh. 1.3 - Prob. 91ECh. 1.3 - Prob. 92ECh. 1.4 - Prob. 93UYKCh. 1.4 - Prob. 94UYKCh. 1.4 - Prob. 95UYKCh. 1.4 - Prob. 96UYKCh. 1.4 - Prob. 97UYKCh. 1.4 - Prob. 98UYKCh. 1.4 - Prob. 99UYKCh. 1.4 - Prob. 100UYKCh. 1.4 - Prob. 101ECh. 1.4 - Prob. 102ECh. 1.4 - Prob. 103ECh. 1.4 - Prob. 104ECh. 1.4 - Prob. 105ECh. 1.4 - Prob. 106ECh. 1.4 - Prob. 107ECh. 1.4 - Prob. 108ECh. 1.4 - Prob. 109ECh. 1.4 - Prob. 110ECh. 1.4 - Prob. 111ECh. 1.4 - Prob. 112ECh. 1.4 - Prob. 113ECh. 1.4 - Prob. 114ECh. 1.4 - Prob. 115ECh. 1.4 - Prob. 116ECh. 1.4 - Prob. 117ECh. 1.4 - Prob. 118ECh. 1.4 - Prob. 119ECh. 1.4 - Prob. 120ECh. 1.4 - Prob. 121ECh. 1.4 - Prob. 122ECh. 1.4 - Prob. 123ECh. 1.4 - Prob. 124ECh. 1.4 - Prob. 125ECh. 1.4 - Prob. 126ECh. 1.4 - Prob. 127ECh. 1.4 - Prob. 128ECh. 1.4 - Prob. 129ECh. 1.4 - Prob. 130ECh. 1.4 - Prob. 131ECh. 1.4 - Prob. 132ECh. 1.4 - Prob. 133ECh. 1.4 - Prob. 134ECh. 1.4 - Prob. 135ECh. 1.4 - Prob. 136ECh. 1.4 - Prob. 137ECh. 1.4 - Prob. 138ECh. 1.4 - Prob. 139ECh. 1.4 - Prob. 140ECh. 1.4 - Prob. 141ECh. 1.4 - Prob. 142ECh. 1.4 - Prob. 143ECh. 1.4 - Prob. 144ECh. 1 - Prob. 145ECh. 1 - Prob. 146ECh. 1 - Prob. 147ECh. 1 - Prob. 148ECh. 1 - Prob. 149ECh. 1 - Prob. 150ECh. 1 - Prob. 151ECh. 1 - Prob. 152ECh. 1 - Prob. 153ECh. 1 - Prob. 154ECh. 1 - Prob. 155ECh. 1 - Prob. 156ECh. 1 - Prob. 157ECh. 1 - Prob. 158ECh. 1 - Prob. 159ECh. 1 - Prob. 160ECh. 1 - Prob. 161ECh. 1 - Prob. 162ECh. 1 - Prob. 163ECh. 1 - Prob. 164ECh. 1 - Prob. 165ECh. 1 - Prob. 166ECh. 1 - Prob. 167ECh. 1 - Prob. 168E
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