Mathematical Statistics with Applications
7th Edition
ISBN: 9780495110811
Author: Dennis Wackerly, William Mendenhall, Richard L. Scheaffer
Publisher: Cengage Learning
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Chapter 15.8, Problem 43E
To determine
Show that
Compare the result with the square of the Z statistic.
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solving problem 1
select bmw stock. you can assume the price of the stock
This problem is based on the fundamental option pricing formula for the continuous-time
model developed in class, namely the value at time 0 of an option with maturity T and
payoff F is given by:
We consider the two options below:
Fo=
-rT
= e
Eq[F].
1
A. An option with which you must buy a share of stock at expiration T = 1 for strike
price K = So.
B. An option with which you must buy a share of stock at expiration T = 1 for strike
price K given by
T
K =
T
St dt.
(Note that both options can have negative payoffs.) We use the continuous-time Black-
Scholes model to price these options. Assume that the interest rate on the money market
is r.
(a) Using the fundamental option pricing formula, find the price of option A. (Hint:
use the martingale properties developed in the lectures for the stock price process
in order to calculate the expectations.)
(b) Using the fundamental option pricing formula, find the price of option B.
(c) Assuming the interest rate is very small (r ~0), use Taylor…
Chapter 15 Solutions
Mathematical Statistics with Applications
Ch. 15.3 - What significance levels between = .01 and = .15...Ch. 15.3 - Prob. 2ECh. 15.3 - Clinical data concerning the effectiveness of two...Ch. 15.3 - Prob. 4ECh. 15.3 - New food products are frequently subjected to...Ch. 15.3 - On clear, cold nights in the central Florida...Ch. 15.3 - A psychological experiment was conducted to...Ch. 15.3 - Refer to Exercise 12.15. Using the sign test, do...Ch. 15.3 - Prob. 9ECh. 15.4 - The accompanying table gives the scores of a group...
Ch. 15.4 - Refer to Exercise 15.4. What answers are obtained...Ch. 15.4 - Refer to Exercise 15.6(a). Answer the question by...Ch. 15.4 - Eight subjects were asked to perform a simple...Ch. 15.4 - Two methods, A and B, for controlling traffic were...Ch. 15.4 - Dental researchers have developed a new material...Ch. 15.4 - Refer to Exercise 12.16. With = .01, use the...Ch. 15.4 - Suppose that Y1, Y2,, Yn is a random sample from a...Ch. 15.4 - The spokesperson for an organization supporting...Ch. 15.6 - Find the p-values associated with each of the...Ch. 15.6 - In some tests of healthy, elderly men, a new drug...Ch. 15.6 - Two plastics, each produced by a different...Ch. 15.6 - Prob. 24ECh. 15.6 - Prob. 25ECh. 15.6 - Prob. 26ECh. 15.6 - Prob. 27ECh. 15.6 - Prob. 28ECh. 15.7 - The table that follows contains data on the leaf...Ch. 15.7 - Prob. 30ECh. 15.7 - Three different brands of magnetron tubes (the key...Ch. 15.7 - An experiment was conducted to compare the length...Ch. 15.7 - Prob. 33ECh. 15.7 - Prob. 34ECh. 15.7 - Prob. 35ECh. 15.8 - In a study of palatability of antibiotics for...Ch. 15.8 - Prob. 38ECh. 15.8 - Prob. 39ECh. 15.8 - A serious drought-related problem for farmers is...Ch. 15.8 - Prob. 41ECh. 15.8 - Prob. 42ECh. 15.8 - Prob. 43ECh. 15.8 - Prob. 44ECh. 15.8 - Prob. 45ECh. 15.9 - Prob. 46ECh. 15.9 - Prob. 47ECh. 15.9 - Prob. 48ECh. 15.9 - Prob. 49ECh. 15.9 - Prob. 50ECh. 15.9 - Prob. 52ECh. 15.10 - Prob. 53ECh. 15.10 - Prob. 54ECh. 15.10 - Prob. 55ECh. 15.10 - Prob. 56ECh. 15.10 - Prob. 57ECh. 15.10 - Prob. 58ECh. 15.10 - Refer to Exercise 11.4. Regard both book and...Ch. 15.10 - Prob. 60ECh. 15 - Prob. 62SECh. 15 - Prob. 63SECh. 15 - Prob. 64SECh. 15 - Prob. 65SECh. 15 - Prob. 67SECh. 15 - Prob. 69SECh. 15 - Prob. 70SECh. 15 - Prob. 71SECh. 15 - Prob. 72SECh. 15 - Prob. 74SECh. 15 - Prob. 75SECh. 15 - Prob. 76SECh. 15 - Prob. 77SECh. 15 - Prob. 78SE
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