Applied Statistics and Probability for Engineers
6th Edition
ISBN: 9781118539712
Author: Douglas C. Montgomery
Publisher: WILEY
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Chapter 15, Problem 105SE
a.
To determine
Construct the CUSUM control chart with 0.4 as target level.
Explain how the estimates of
Identify whether the process is in control.
b.
To determine
Construct the EWMA control chart.
Compare with the conclusions obtained from part (a).
Identify whether the process is in control
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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 15 Solutions
Applied Statistics and Probability for Engineers
Ch. 15.3 - 15-1. Control charts for and R are to be set up...Ch. 15.3 - 15-2. Twenty-five samples of size 5 are drawn from...Ch. 15.3 - 15-3. Control charts are to be constructed for...Ch. 15.3 - 15-4. Samples of size n = 6 are collected from a...Ch. 15.3 - 15-5. The level of cholesterol (in mg/dL) is an...Ch. 15.3 - 15-6. An control chart with three-sigma control...Ch. 15.3 - 15-7. An extrusion die is used to produce aluminum...Ch. 15.3 - 15-8. The copper content of a plating bath is...Ch. 15.3 - 15-9. The pull strength of a wire-bonded lead for...Ch. 15.3 - 15-10. The following data were considered in...
Ch. 15.3 - 15-11. The thickness of a metal part is an...Ch. 15.3 - 15-12. Apply the Western Electric Rules to the...Ch. 15.3 - 15-13. Apply the Western Electric Rules to the...Ch. 15.3 - 15-14. Web traffic can be measured to help...Ch. 15.3 - 15-15. Consider the data in Exercise 15-9....Ch. 15.3 - 15-16. Consider the data in Exercise 15-10....Ch. 15.3 - 15-17. An X control chart with 3-sigma control...Ch. 15.3 - 15-18. An article in Quality & Safety in Health...Ch. 15.4 - 15-19. Twenty successive hardness measurements are...Ch. 15.4 - 15-20. In a semiconductor manufacturing process,...Ch. 15.4 - 15-21. O An automatic sensor measures the diameter...Ch. 15.4 - 15-22. The viscosity of a chemical intermediate is...Ch. 15.4 - 15-23. The following table of data was analyzed in...Ch. 15.4 - 15-24. Pulsed laser deposition technique is a thin...Ch. 15.4 - 15-25. The production manager of a soap...Ch. 15.4 - 15-26. An article in Quality & Safety in Health...Ch. 15.4 - 15-27. An article in Journal of the Operational...Ch. 15.5 - 15-28. Suppose that a quality characteristic is...Ch. 15.5 - 15-29. Suppose that a quality characteristic is...Ch. 15.5 - 15-30. Suppose that a quality characteristic is...Ch. 15.5 - 15-31. A normally distributed process uses 66.7%...Ch. 15.5 - 15-32. A normally distributed process uses 85% of...Ch. 15.5 - 15-33. Reconsider Exercise 15-1. Suppose that the...Ch. 15.5 - 15-34. Reconsider Exercise 15-2 in which the...Ch. 15.5 - 15-35. Reconsider Exercise 15-3. Suppose that the...Ch. 15.5 - 15-36. Reconsider Exercise 15-4(a). Assuming that...Ch. 15.5 - 15-37. Reconsider the diameter measurements in...Ch. 15.5 - 15-38. Reconsider the copper-content measurements...Ch. 15.5 - 15-39. Reconsider the pull-strength measurements...Ch. 15.5 - 15-40. Reconsider the syringe lengths in Exercise...Ch. 15.5 - 15-41. Reconsider the hardness measurements in...Ch. 15.5 - 15-42. Reconsider the viscosity measurements in...Ch. 15.5 - 15-43. Suppose that a quality characteristic is...Ch. 15.5 - 15-44. Suppose that a quality characteristic is...Ch. 15.5 - 15-45. An control chart with 3-sigma control...Ch. 15.5 - 15-46. A control chart for individual observations...Ch. 15.5 - 15-47. A process mean is centered between the...Ch. 15.5 - 15-48. The PCR for a measurement is 1.5 and the...Ch. 15.6 - 15-49. An early example of SPC was described in...Ch. 15.6 - 15-50. Suppose that the following fraction...Ch. 15.6 - 15-51. The following are the numbers of defective...Ch. 15.6 - 15-52. The following represent the number of...Ch. 15.6 - 15-53. The following represent the number of...Ch. 15.6 - 15-54. Consider the data on the number of...Ch. 15.6 - 15-55. In a semiconductor manufacturing company,...Ch. 15.6 - Prob. 56ECh. 15.6 - Prob. 57ECh. 15.6 - Prob. 58ECh. 15.7 - Prob. 59ECh. 15.7 - Prob. 60ECh. 15.7 - 15-61. Consider the control chart in Fig. 15-3....Ch. 15.7 - Prob. 62ECh. 15.7 - Prob. 63ECh. 15.7 - Prob. 64ECh. 15.7 - Prob. 65ECh. 15.7 - Prob. 66ECh. 15.7 - Prob. 67ECh. 15.7 - Prob. 68ECh. 15.7 - Prob. 69ECh. 15.7 - 15-70. Consider an control chart with UCL =...Ch. 15.7 - Prob. 71ECh. 15.7 - Prob. 72ECh. 15.8 - Prob. 73ECh. 15.8 - Prob. 74ECh. 15.8 - Prob. 75ECh. 15.8 - Prob. 76ECh. 15.8 - Prob. 77ECh. 15.8 - Prob. 78ECh. 15.8 - Prob. 79ECh. 15.8 - Prob. 80ECh. 15.8 - Prob. 81ECh. 15.8 - 15-82. A process has a target of μ0 = 100 and a...Ch. 15.8 - 15-83. Heart rate (in counts/minute) is measured...Ch. 15.8 - Prob. 84ECh. 15.8 - Prob. 85ECh. 15.8 - Prob. 86ECh. 15.9 - Prob. 87ECh. 15.9 - Prob. 88ECh. 15.9 - Prob. 89ECh. 15.9 - Prob. 90ECh. 15 - Prob. 91SECh. 15 - 15-92. Rework Exercise 15-91 with and S...Ch. 15 - Prob. 93SECh. 15 - Prob. 94SECh. 15 - 15-95. An article in Quality Engineering [“Is the...Ch. 15 - Prob. 96SECh. 15 - Prob. 97SECh. 15 - Prob. 98SECh. 15 - Prob. 99SECh. 15 - Prob. 100SECh. 15 - Prob. 101SECh. 15 - Prob. 102SECh. 15 - Prob. 103SECh. 15 - Prob. 104SECh. 15 - Prob. 105SECh. 15 - Prob. 106SECh. 15 - Prob. 107SECh. 15 - Prob. 108SECh. 15 - 15-109. The depth of a keyway is an important part...Ch. 15 - Prob. 110SECh. 15 - Prob. 111SECh. 15 - Prob. 112SECh. 15 - Prob. 113SECh. 15 - Prob. 114SECh. 15 - Prob. 115SECh. 15 - Prob. 117SECh. 15 - Prob. 118SECh. 15 - 15-119. Consider an control chart with UCL =...Ch. 15 - Prob. 120SECh. 15 - Prob. 121SECh. 15 - Prob. 122SECh. 15 - Prob. 123SECh. 15 - Prob. 124SECh. 15 - Prob. 125SECh. 15 - Prob. 126SECh. 15 - Prob. 127SECh. 15 - Prob. 128SECh. 15 - Prob. 129SECh. 15 - Prob. 130SECh. 15 - Prob. 131SECh. 15 - 15-132. Consider an control chart with k-sigma...Ch. 15 - Prob. 133SECh. 15 - Prob. 134SECh. 15 - Prob. 135SECh. 15 - Prob. 136SECh. 15 - 15-137. Consider a process whose specifications on...Ch. 15 - Prob. 138SECh. 15 - Prob. 139SECh. 15 - Prob. 140SECh. 15 - Prob. 141SE
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