Bundle: Nature Of Mathematics, Loose-leaf Version, 13th + Webassign Printed Access Card For Smith's Nature Of Mathematics, 13th Edition, Single-term
13th Edition
ISBN: 9781337605076
Author: karl J. smith
Publisher: Cengage Learning
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Chapter 15.3, Problem 52PS
To determine
To graph:
The population curve for a growth rate of
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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…
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.)
3. Consider the polynomial equation 6-iz+7z² - iz³ +z = 0 for which the roots are 3i, -2i, -i,
and i.
(a) Verify the relations between this roots and the coefficients of the polynomial.
(b) Find the annulus region in which the roots lie.
Chapter 15 Solutions
Bundle: Nature Of Mathematics, Loose-leaf Version, 13th + Webassign Printed Access Card For Smith's Nature Of Mathematics, 13th Edition, Single-term
Ch. 15.1 - Use the map of Venus shown in Figure 15.13 to name...Ch. 15.1 - Prob. 2PSCh. 15.1 - Prob. 3PSCh. 15.1 - Prob. 4PSCh. 15.1 - Prob. 5PSCh. 15.1 - Prob. 6PSCh. 15.1 - Prob. 7PSCh. 15.1 - Prob. 8PSCh. 15.1 - Prob. 9PSCh. 15.1 - Prob. 10PS
Ch. 15.1 - Prob. 11PSCh. 15.1 - Prob. 12PSCh. 15.1 - Prob. 13PSCh. 15.1 - Prob. 14PSCh. 15.1 - Prob. 15PSCh. 15.1 - Prob. 16PSCh. 15.1 - Prob. 17PSCh. 15.1 - Prob. 18PSCh. 15.1 - Prob. 19PSCh. 15.1 - Prob. 20PSCh. 15.1 - Prob. 21PSCh. 15.1 - Prob. 22PSCh. 15.1 - Prob. 23PSCh. 15.1 - Prob. 24PSCh. 15.1 - Prob. 25PSCh. 15.1 - Prob. 26PSCh. 15.1 - Prob. 27PSCh. 15.1 - Prob. 28PSCh. 15.1 - Prob. 29PSCh. 15.1 - Prob. 30PSCh. 15.1 - Prob. 31PSCh. 15.1 - Prob. 32PSCh. 15.1 - Prob. 33PSCh. 15.1 - Prob. 34PSCh. 15.1 - Prob. 35PSCh. 15.1 - Prob. 36PSCh. 15.1 - Prob. 37PSCh. 15.1 - Prob. 38PSCh. 15.1 - Prob. 39PSCh. 15.1 - Prob. 40PSCh. 15.1 - Prob. 41PSCh. 15.1 - Prob. 42PSCh. 15.1 - Prob. 43PSCh. 15.1 - Level 2 Graph the lines in Problems 31-44. y=0.01xCh. 15.1 - Prob. 45PSCh. 15.1 - Prob. 46PSCh. 15.1 - Prob. 47PSCh. 15.1 - Prob. 48PSCh. 15.1 - Prob. 49PSCh. 15.1 - Prob. 50PSCh. 15.1 - Prob. 51PSCh. 15.1 - Prob. 52PSCh. 15.1 - Prob. 53PSCh. 15.1 - Prob. 54PSCh. 15.1 - Prob. 55PSCh. 15.1 - Prob. 56PSCh. 15.1 - Prob. 57PSCh. 15.1 - Prob. 58PSCh. 15.1 - Prob. 59PSCh. 15.1 - Prob. 60PSCh. 15.2 - Prob. 1PSCh. 15.2 - Prob. 2PSCh. 15.2 - Prob. 3PSCh. 15.2 - Prob. 4PSCh. 15.2 - Prob. 5PSCh. 15.2 - Prob. 6PSCh. 15.2 - Prob. 7PSCh. 15.2 - Prob. 8PSCh. 15.2 - Prob. 9PSCh. 15.2 - Prob. 10PSCh. 15.2 - Prob. 11PSCh. 15.2 - Prob. 12PSCh. 15.2 - Prob. 13PSCh. 15.2 - Prob. 14PSCh. 15.2 - Prob. 15PSCh. 15.2 - Prob. 16PSCh. 15.2 - Prob. 17PSCh. 15.2 - Prob. 18PSCh. 15.2 - Prob. 19PSCh. 15.2 - Prob. 20PSCh. 15.2 - Prob. 21PSCh. 15.2 - Prob. 22PSCh. 15.2 - Prob. 23PSCh. 15.2 - Prob. 24PSCh. 15.2 - Prob. 25PSCh. 15.2 - Prob. 26PSCh. 15.2 - Prob. 27PSCh. 15.2 - Prob. 28PSCh. 15.2 - Prob. 29PSCh. 15.2 - Prob. 30PSCh. 15.2 - Prob. 31PSCh. 15.2 - Prob. 32PSCh. 15.2 - Prob. 33PSCh. 15.2 - Prob. 34PSCh. 15.2 - Prob. 35PSCh. 15.2 - Prob. 36PSCh. 15.2 - Prob. 37PSCh. 15.2 - Prob. 38PSCh. 15.2 - Prob. 39PSCh. 15.2 - Prob. 40PSCh. 15.2 - Prob. 41PSCh. 15.2 - Prob. 42PSCh. 15.2 - Prob. 43PSCh. 15.2 - Prob. 44PSCh. 15.2 - Prob. 45PSCh. 15.2 - Prob. 46PSCh. 15.2 - Prob. 47PSCh. 15.2 - Prob. 48PSCh. 15.2 - Prob. 49PSCh. 15.2 - Problem Set. Level 2 Theron needs to purchase...Ch. 15.2 - Prob. 51PSCh. 15.2 - Prob. 52PSCh. 15.2 - Prob. 53PSCh. 15.2 - Prob. 54PSCh. 15.2 - Prob. 55PSCh. 15.2 - Prob. 56PSCh. 15.2 - Prob. 57PSCh. 15.2 - Prob. 58PSCh. 15.2 - Prob. 59PSCh. 15.2 - Prob. 60PSCh. 15.3 - Prob. 1PSCh. 15.3 - Prob. 2PSCh. 15.3 - Prob. 3PSCh. 15.3 - Prob. 4PSCh. 15.3 - Prob. 5PSCh. 15.3 - Prob. 6PSCh. 15.3 - Prob. 7PSCh. 15.3 - Prob. 8PSCh. 15.3 - Prob. 9PSCh. 15.3 - Prob. 10PSCh. 15.3 - Prob. 11PSCh. 15.3 - Prob. 12PSCh. 15.3 - Prob. 13PSCh. 15.3 - Prob. 14PSCh. 15.3 - Prob. 15PSCh. 15.3 - Prob. 16PSCh. 15.3 - Prob. 17PSCh. 15.3 - Prob. 18PSCh. 15.3 - Prob. 19PSCh. 15.3 - Prob. 20PSCh. 15.3 - Prob. 21PSCh. 15.3 - Prob. 22PSCh. 15.3 - Prob. 23PSCh. 15.3 - Prob. 24PSCh. 15.3 - Prob. 25PSCh. 15.3 - Prob. 26PSCh. 15.3 - Prob. 27PSCh. 15.3 - Prob. 28PSCh. 15.3 - Prob. 29PSCh. 15.3 - Prob. 30PSCh. 15.3 - Prob. 31PSCh. 15.3 - Prob. 32PSCh. 15.3 - Prob. 33PSCh. 15.3 - Prob. 34PSCh. 15.3 - Prob. 35PSCh. 15.3 - Prob. 36PSCh. 15.3 - Prob. 37PSCh. 15.3 - Prob. 38PSCh. 15.3 - Prob. 39PSCh. 15.3 - Prob. 40PSCh. 15.3 - Prob. 41PSCh. 15.3 - Prob. 42PSCh. 15.3 - Prob. 43PSCh. 15.3 - Prob. 44PSCh. 15.3 - Prob. 45PSCh. 15.3 - Prob. 46PSCh. 15.3 - Prob. 47PSCh. 15.3 - Prob. 48PSCh. 15.3 - Prob. 49PSCh. 15.3 - Prob. 50PSCh. 15.3 - Prob. 51PSCh. 15.3 - Prob. 52PSCh. 15.3 - Prob. 53PSCh. 15.3 - Prob. 54PSCh. 15.3 - Prob. 55PSCh. 15.3 - HISTORICAL QUEST In economics, the Laffer curve is...Ch. 15.3 - Prob. 57PSCh. 15.3 - Prob. 58PSCh. 15.3 - Prob. 59PSCh. 15.3 - Prob. 60PSCh. 15.4 - IN YOUR OWN WORDS What is a conic section?Ch. 15.4 - Prob. 2PSCh. 15.4 - Prob. 3PSCh. 15.4 - Prob. 4PSCh. 15.4 - Prob. 5PSCh. 15.4 - Prob. 6PSCh. 15.4 - Prob. 7PSCh. 15.4 - Prob. 8PSCh. 15.4 - Prob. 9PSCh. 15.4 - Prob. 10PSCh. 15.4 - Prob. 11PSCh. 15.4 - Prob. 12PSCh. 15.4 - Prob. 13PSCh. 15.4 - Prob. 14PSCh. 15.4 - Prob. 15PSCh. 15.4 - Prob. 16PSCh. 15.4 - Prob. 17PSCh. 15.4 - Prob. 18PSCh. 15.4 - Prob. 19PSCh. 15.4 - Prob. 20PSCh. 15.4 - Prob. 21PSCh. 15.4 - Prob. 22PSCh. 15.4 - Prob. 23PSCh. 15.4 - Prob. 24PSCh. 15.4 - Prob. 25PSCh. 15.4 - Prob. 26PSCh. 15.4 - Prob. 27PSCh. 15.4 - Level 2 Sketch the curves using the equations...Ch. 15.4 - Prob. 29PSCh. 15.4 - Prob. 30PSCh. 15.4 - Level 2 Sketch the curves using the equations...Ch. 15.4 - Prob. 32PSCh. 15.4 - Level 2 Sketch the curves using the equations...Ch. 15.4 - Prob. 34PSCh. 15.4 - Prob. 35PSCh. 15.4 - Prob. 36PSCh. 15.4 - Prob. 37PSCh. 15.4 - Prob. 38PSCh. 15.4 - Prob. 39PSCh. 15.4 - Prob. 40PSCh. 15.4 - Prob. 41PSCh. 15.4 - Prob. 42PSCh. 15.4 - Prob. 43PSCh. 15.4 - Prob. 44PSCh. 15.4 - Prob. 45PSCh. 15.4 - Prob. 46PSCh. 15.4 - Prob. 47PSCh. 15.4 - Prob. 48PSCh. 15.4 - Prob. 49PSCh. 15.4 - Prob. 50PSCh. 15.4 - Prob. 51PSCh. 15.4 - Prob. 52PSCh. 15.4 - Prob. 53PSCh. 15.4 - Prob. 54PSCh. 15.4 - Prob. 55PSCh. 15.4 - Prob. 56PSCh. 15.4 - A radar antenna is constructed so that a cross...Ch. 15.4 - Prob. 58PSCh. 15.4 - Prob. 59PSCh. 15.4 - Prob. 60PSCh. 15.5 - IN YOUR OWN WORDS What is a function?Ch. 15.5 - Prob. 2PSCh. 15.5 - Prob. 3PSCh. 15.5 - Prob. 4PSCh. 15.5 - Prob. 5PSCh. 15.5 - Prob. 6PSCh. 15.5 - Prob. 7PSCh. 15.5 - Prob. 8PSCh. 15.5 - Prob. 9PSCh. 15.5 - Prob. 10PSCh. 15.5 - Prob. 11PSCh. 15.5 - Prob. 12PSCh. 15.5 - Prob. 13PSCh. 15.5 - Prob. 14PSCh. 15.5 - Prob. 15PSCh. 15.5 - Prob. 16PSCh. 15.5 - Prob. 17PSCh. 15.5 - Prob. 18PSCh. 15.5 - Prob. 19PSCh. 15.5 - Prob. 20PSCh. 15.5 - Prob. 21PSCh. 15.5 - Prob. 22PSCh. 15.5 - Prob. 23PSCh. 15.5 - Prob. 24PSCh. 15.5 - Prob. 25PSCh. 15.5 - Prob. 26PSCh. 15.5 - Prob. 27PSCh. 15.5 - Prob. 28PSCh. 15.5 - Prob. 29PSCh. 15.5 - Prob. 30PSCh. 15.5 - Prob. 31PSCh. 15.5 - Prob. 32PSCh. 15.5 - Prob. 33PSCh. 15.5 - Prob. 34PSCh. 15.5 - Prob. 35PSCh. 15.5 - Prob. 36PSCh. 15.5 - Prob. 37PSCh. 15.5 - Prob. 38PSCh. 15.5 - Prob. 39PSCh. 15.5 - Prob. 40PSCh. 15.5 - Prob. 41PSCh. 15.5 - Prob. 42PSCh. 15.5 - Prob. 43PSCh. 15.5 - Prob. 44PSCh. 15.5 - Prob. 45PSCh. 15.5 - Prob. 46PSCh. 15.5 - Prob. 47PSCh. 15.5 - Prob. 48PSCh. 15.5 - Prob. 49PSCh. 15.5 - Prob. 50PSCh. 15.5 - Prob. 51PSCh. 15.5 - Prob. 52PSCh. 15.5 - Prob. 53PSCh. 15.5 - Prob. 54PSCh. 15.5 - Prob. 55PSCh. 15.5 - Prob. 56PSCh. 15.5 - Prob. 57PSCh. 15.5 - Prob. 58PSCh. 15.5 - Find the area of the square as a function of its...Ch. 15.5 - Prob. 60PSCh. 15.CR - Prob. 1CRCh. 15.CR - Prob. 2CRCh. 15.CR - Prob. 3CRCh. 15.CR - Prob. 4CRCh. 15.CR - Prob. 5CRCh. 15.CR - Prob. 6CRCh. 15.CR - Prob. 7CRCh. 15.CR - Prob. 8CRCh. 15.CR - Prob. 9CRCh. 15.CR - Prob. 10CRCh. 15.CR - Prob. 11CRCh. 15.CR - Prob. 12CRCh. 15.CR - Prob. 13CRCh. 15.CR - Prob. 14CRCh. 15.CR - Prob. 15CRCh. 15.CR - Prob. 16CRCh. 15.CR - Prob. 17CRCh. 15.CR - Prob. 18CRCh. 15.CR - Prob. 19CRCh. 15.CR - Prob. 20CR
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