Basic Business Statistics, Student Value Edition
14th Edition
ISBN: 9780134685113
Author: Mark L. Berenson, David M. Levine, David F. Stephan, Kathryn Szabat
Publisher: PEARSON
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Chapter 16, Problem 35PS
a.
To determine
Perform a residual analysis.
b.
To determine
Compute
c.
To determine
Compute the MAD.
d.
To determine
Discuss which forecasting model should is appropriate.
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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 16 Solutions
Basic Business Statistics, Student Value Edition
Ch. 16 - If you are using exponential smoothing for...Ch. 16 - Consider a nine-year moving average used to smooth...Ch. 16 - You are using exponential smoothing on an annual...Ch. 16 - Prob. 4PSCh. 16 - Prob. 5PSCh. 16 - How have stocks performed in the past? The...Ch. 16 - Prob. 7PSCh. 16 - Prob. 8PSCh. 16 - Prob. 9PSCh. 16 - Prob. 10PS
Ch. 16 - The linear trend forecasting equation for an...Ch. 16 - There has been much publicity about bounces paid...Ch. 16 - Prob. 13PSCh. 16 - Prob. 14PSCh. 16 - Prob. 15PSCh. 16 - The data shown in the following table and stored...Ch. 16 - Prob. 17PSCh. 16 - Prob. 18PSCh. 16 - Prob. 19PSCh. 16 - Prob. 20PSCh. 16 - Prob. 21PSCh. 16 - Prob. 22PSCh. 16 - You are given an annual time series with 40...Ch. 16 - Prob. 24PSCh. 16 - Prob. 25PSCh. 16 - Prob. 26PSCh. 16 - Prob. 27PSCh. 16 - Prob. 28PSCh. 16 - Prob. 29PSCh. 16 - Using the average baseball salary from 200 through...Ch. 16 - Using the yearly amount of solar power generated...Ch. 16 - The following residuals are from a linear trend...Ch. 16 - Prob. 33PSCh. 16 - Prob. 34PSCh. 16 - Prob. 35PSCh. 16 - Prob. 36PSCh. 16 - Prob. 37PSCh. 16 - Prob. 38PSCh. 16 - Prob. 39PSCh. 16 - Prob. 40PSCh. 16 - In forecasting daily time-series data, how many...Ch. 16 - In forecasting a quarterly time series over the...Ch. 16 - Prob. 43PSCh. 16 - Prob. 44PSCh. 16 - Are gasoline prices higher during the height of...Ch. 16 - Prob. 46PSCh. 16 - Prob. 47PSCh. 16 - The file Silver-Q contains the price in London for...Ch. 16 - Prob. 49PSCh. 16 - What is a time series?Ch. 16 - What are the different components of a time-series...Ch. 16 - What is the difference between moving average and...Ch. 16 - Prob. 53PSCh. 16 - How does the least-squares linear trend...Ch. 16 - How does autoregressive modelling differ from the...Ch. 16 - What are the different approaches to choosing an...Ch. 16 - What is the major difference between using SYX and...Ch. 16 - How does forecasting for monthly or quarterly data...Ch. 16 - Prob. 60PSCh. 16 - The monthly commercial and residential prices for...Ch. 16 - The data stored in McDonalds represent the gross...Ch. 16 - Teachers’ Retirement System of the City of New...Ch. 16 - Prob. 64PS
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