Mylab Math With Pearson Etext -- 18 Week Standalone Access Card -- For Basic Technical Mathematics With Calculus
11th Edition
ISBN: 9780135902912
Author: Allyn J. Washington
Publisher: PEARSON
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Chapter 19.3, Problem 18E
To determine
The fraction that has the decimal form
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Students have asked these similar questions
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.)
Problem 4. Margrabe formula and the Greeks (20 pts)
In the homework, we determined the Margrabe formula for the price of an option allowing you to
swap an x-stock for a y-stock at time T. For stocks with initial values xo, yo, common volatility
σ and correlation p, the formula was given by
Fo=yo (d+)-x0Þ(d_),
where
In (±²
Ꭲ
d+
õ√T
and
σ = σ√√√2(1 - p).
дго
(a) We want to determine a "Greek" for ỡ on the option: find a formula for
θα
(b) Is
дго
θα
positive or negative?
(c) We consider a situation in which the correlation p between the two stocks increases: what
can you say about the price Fo?
(d) Assume that yo< xo and p = 1. What is the price of the option?
The Course Name Real Analysis please Solve questions by Real Analysis
Chapter 19 Solutions
Mylab Math With Pearson Etext -- 18 Week Standalone Access Card -- For Basic Technical Mathematics With Calculus
Ch. 19.1 - Find the 20th term of the arithmetic sequence 2,...Ch. 19.1 - Prob. 2PECh. 19.1 - Prob. 3PECh. 19.1 - Prob. 1ECh. 19.1 - Prob. 2ECh. 19.1 - Prob. 3ECh. 19.1 - Prob. 4ECh. 19.1 - In Exercises 3–6, write the first five terms of...Ch. 19.1 - Prob. 6ECh. 19.1 - Prob. 7E
Ch. 19.1 - Prob. 8ECh. 19.1 - Prob. 9ECh. 19.1 - In Exercises 7–14, find the nth term of the...Ch. 19.1 - Prob. 11ECh. 19.1 - Prob. 12ECh. 19.1 - Prob. 13ECh. 19.1 - Prob. 14ECh. 19.1 - In Exercises 15–18, find the sum of the n terms of...Ch. 19.1 - Prob. 16ECh. 19.1 - Prob. 17ECh. 19.1 - Prob. 18ECh. 19.1 - Prob. 19ECh. 19.1 - Prob. 20ECh. 19.1 - Prob. 21ECh. 19.1 - Prob. 22ECh. 19.1 - Prob. 23ECh. 19.1 - Prob. 24ECh. 19.1 - Prob. 25ECh. 19.1 - Prob. 26ECh. 19.1 - In Exercises 27–56, find the indicated quantities...Ch. 19.1 - Prob. 28ECh. 19.1 - Prob. 29ECh. 19.1 - Prob. 30ECh. 19.1 - In Exercises 27–56, find the indicated quantities...Ch. 19.1 - Prob. 32ECh. 19.1 - Prob. 33ECh. 19.1 - Prob. 34ECh. 19.1 - Prob. 35ECh. 19.1 - Prob. 36ECh. 19.1 - Prob. 37ECh. 19.1 - Prob. 38ECh. 19.1 - Prob. 39ECh. 19.1 - Prob. 40ECh. 19.1 - Prob. 41ECh. 19.1 - In Exercises 27–56, find the indicated quantities...Ch. 19.1 - Prob. 43ECh. 19.1 - In Exercises 27–56, find the indicated quantities...Ch. 19.1 - Prob. 45ECh. 19.1 - Prob. 46ECh. 19.1 - Prob. 47ECh. 19.1 - Prob. 48ECh. 19.1 - In Exercises 27–56, find the indicated quantities...Ch. 19.1 - Prob. 50ECh. 19.1 - Prob. 51ECh. 19.1 -
In Exercises 27–56, find the indicated quantities...Ch. 19.1 - Prob. 53ECh. 19.1 - Prob. 54ECh. 19.1 - Prob. 55ECh. 19.1 - Prob. 56ECh. 19.2 -
Find the sixth term of the geometric sequence 8,...Ch. 19.2 - Prob. 2PECh. 19.2 - Prob. 3PECh. 19.2 - Prob. 1ECh. 19.2 - Prob. 2ECh. 19.2 - Prob. 3ECh. 19.2 - Prob. 4ECh. 19.2 - Prob. 5ECh. 19.2 - Prob. 6ECh. 19.2 - Prob. 7ECh. 19.2 - Prob. 8ECh. 19.2 - Prob. 9ECh. 19.2 - Prob. 10ECh. 19.2 - Prob. 11ECh. 19.2 - Prob. 12ECh. 19.2 - Prob. 13ECh. 19.2 - Prob. 14ECh. 19.2 - In Exercises 15–20, find the sum of the first n...Ch. 19.2 - Prob. 16ECh. 19.2 - Prob. 17ECh. 19.2 - Prob. 18ECh. 19.2 - Prob. 19ECh. 19.2 - Prob. 20ECh. 19.2 - Prob. 21ECh. 19.2 - Prob. 22ECh. 19.2 -
In Exercises 21–28, find any of the values of a1,...Ch. 19.2 - Prob. 24ECh. 19.2 -
In Exercises 21–28, find any of the values of a1,...Ch. 19.2 - Prob. 26ECh. 19.2 - Prob. 27ECh. 19.2 - Prob. 28ECh. 19.2 - Prob. 29ECh. 19.2 - Prob. 30ECh. 19.2 - Prob. 31ECh. 19.2 - Prob. 32ECh. 19.2 - Prob. 33ECh. 19.2 - Prob. 34ECh. 19.2 - Prob. 35ECh. 19.2 - Prob. 36ECh. 19.2 - Prob. 37ECh. 19.2 - Prob. 38ECh. 19.2 - Prob. 39ECh. 19.2 - Prob. 40ECh. 19.2 - Prob. 41ECh. 19.2 - Prob. 42ECh. 19.2 - Prob. 43ECh. 19.2 - Prob. 44ECh. 19.2 - Prob. 45ECh. 19.2 - Prob. 46ECh. 19.2 - Prob. 47ECh. 19.2 - Prob. 48ECh. 19.2 - Prob. 49ECh. 19.2 - Prob. 50ECh. 19.2 -
In Exercises 29–56, find the indicated...Ch. 19.2 - Prob. 52ECh. 19.2 -
In Exercises 29–56, find the indicated...Ch. 19.2 - Prob. 54ECh. 19.2 -
In Exercises 29–56, find the indicated...Ch. 19.2 - Prob. 56ECh. 19.3 - Prob. 1PECh. 19.3 - Prob. 2PECh. 19.3 - Prob. 3PECh. 19.3 - Prob. 1ECh. 19.3 - Prob. 2ECh. 19.3 - Prob. 3ECh. 19.3 - Prob. 4ECh. 19.3 - Prob. 5ECh. 19.3 - Prob. 6ECh. 19.3 - Prob. 7ECh. 19.3 - Prob. 8ECh. 19.3 - Prob. 9ECh. 19.3 - Prob. 10ECh. 19.3 - Prob. 11ECh. 19.3 - Prob. 12ECh. 19.3 - Prob. 13ECh. 19.3 - Prob. 14ECh. 19.3 - Prob. 15ECh. 19.3 - Prob. 16ECh. 19.3 - Prob. 17ECh. 19.3 - Prob. 18ECh. 19.3 - In Exercises 15–24, find the fractions equal to...Ch. 19.3 - In Exercises 15–24, find the fractions equal to...Ch. 19.3 - Prob. 21ECh. 19.3 - Prob. 22ECh. 19.3 - Prob. 23ECh. 19.3 - Prob. 24ECh. 19.3 - Prob. 25ECh. 19.3 - Prob. 26ECh. 19.3 - Prob. 27ECh. 19.3 - In Exercises 25–36, solve the given problems by...Ch. 19.3 - Prob. 29ECh. 19.3 - Prob. 30ECh. 19.3 - Prob. 31ECh. 19.3 - Prob. 32ECh. 19.3 - Prob. 33ECh. 19.3 - Prob. 34ECh. 19.3 - Prob. 35ECh. 19.3 - Prob. 36ECh. 19.4 - Prob. 1PECh. 19.4 - Prob. 2PECh. 19.4 - Prob. 3PECh. 19.4 - Prob. 4PECh. 19.4 - Prob. 1ECh. 19.4 - Prob. 2ECh. 19.4 - Prob. 3ECh. 19.4 - Prob. 4ECh. 19.4 - Prob. 5ECh. 19.4 - Prob. 6ECh. 19.4 - Prob. 7ECh. 19.4 - Prob. 8ECh. 19.4 - Prob. 9ECh. 19.4 - Prob. 10ECh. 19.4 - Prob. 11ECh. 19.4 - Prob. 12ECh. 19.4 - Prob. 13ECh. 19.4 - Prob. 14ECh. 19.4 - Prob. 15ECh. 19.4 - Prob. 16ECh. 19.4 - Prob. 17ECh. 19.4 - Prob. 18ECh. 19.4 - Prob. 19ECh. 19.4 - Prob. 20ECh. 19.4 - Prob. 21ECh. 19.4 - Prob. 22ECh. 19.4 - Prob. 23ECh. 19.4 - Prob. 24ECh. 19.4 - Prob. 25ECh. 19.4 - Prob. 26ECh. 19.4 - Prob. 27ECh. 19.4 - Prob. 28ECh. 19.4 - Prob. 29ECh. 19.4 - Prob. 30ECh. 19.4 - Prob. 31ECh. 19.4 - Prob. 32ECh. 19.4 - Prob. 33ECh. 19.4 - Prob. 34ECh. 19.4 - Prob. 35ECh. 19.4 - Prob. 36ECh. 19.4 - Prob. 37ECh. 19.4 - Prob. 38ECh. 19.4 - Prob. 39ECh. 19.4 - Prob. 40ECh. 19.4 - Prob. 41ECh. 19.4 - Prob. 42ECh. 19.4 - Prob. 43ECh. 19.4 - Prob. 44ECh. 19.4 - Prob. 45ECh. 19.4 - Prob. 46ECh. 19.4 - Prob. 47ECh. 19.4 - Prob. 48ECh. 19.4 - Prob. 49ECh. 19.4 - Prob. 50ECh. 19.4 - Prob. 51ECh. 19.4 - Prob. 52ECh. 19.4 - Prob. 53ECh. 19.4 - Prob. 54ECh. 19.4 - Prob. 55ECh. 19.4 - Prob. 56ECh. 19.4 - In Exercises 45–58, solve the given problems.
57....Ch. 19.4 - Prob. 58ECh. 19 - Prob. 1RECh. 19 - Prob. 2RECh. 19 - Prob. 3RECh. 19 - Prob. 4RECh. 19 - Prob. 5RECh. 19 - Prob. 6RECh. 19 - Prob. 7RECh. 19 - Prob. 8RECh. 19 - Prob. 9RECh. 19 - Prob. 10RECh. 19 - Prob. 11RECh. 19 - Prob. 12RECh. 19 - Prob. 13RECh. 19 - Prob. 14RECh. 19 - Prob. 15RECh. 19 - Prob. 16RECh. 19 - Prob. 17RECh. 19 - Prob. 18RECh. 19 - Prob. 19RECh. 19 - Prob. 20RECh. 19 - Prob. 21RECh. 19 - Prob. 22RECh. 19 - Prob. 23RECh. 19 - Prob. 24RECh. 19 - Prob. 25RECh. 19 - Prob. 26RECh. 19 - Prob. 27RECh. 19 - Prob. 28RECh. 19 - In Exercises 27–30, find the sums of the given...Ch. 19 - Prob. 30RECh. 19 - Prob. 31RECh. 19 - Prob. 32RECh. 19 - In Exercises 31–34, find the fractions equal to...Ch. 19 - Prob. 34RECh. 19 - Prob. 35RECh. 19 - Prob. 36RECh. 19 - Prob. 37RECh. 19 - Prob. 38RECh. 19 - Prob. 39RECh. 19 - Prob. 40RECh. 19 - Prob. 41RECh. 19 - Prob. 42RECh. 19 - Prob. 43RECh. 19 - Prob. 44RECh. 19 - Prob. 45RECh. 19 - Prob. 46RECh. 19 - Prob. 47RECh. 19 - Prob. 48RECh. 19 - Prob. 49RECh. 19 - Prob. 50RECh. 19 - Prob. 51RECh. 19 - Prob. 52RECh. 19 - Prob. 53RECh. 19 - Prob. 54RECh. 19 - Prob. 55RECh. 19 - Prob. 56RECh. 19 - Prob. 57RECh. 19 - Prob. 58RECh. 19 - Prob. 59RECh. 19 - Prob. 60RECh. 19 - Prob. 61RECh. 19 - Prob. 62RECh. 19 - Prob. 63RECh. 19 - Prob. 64RECh. 19 - Prob. 65RECh. 19 - Prob. 66RECh. 19 - Prob. 67RECh. 19 - Prob. 68RECh. 19 - In Exercises 51–98, solve the given problems by...Ch. 19 - Prob. 70RECh. 19 - Prob. 71RECh. 19 - Prob. 72RECh. 19 - Prob. 73RECh. 19 - Prob. 74RECh. 19 - Prob. 75RECh. 19 - Prob. 76RECh. 19 - Prob. 77RECh. 19 - Prob. 78RECh. 19 - Prob. 79RECh. 19 - Prob. 80RECh. 19 - In Exercises 51–98, solve the given problems by...Ch. 19 - Prob. 82RECh. 19 - Prob. 83RECh. 19 - Prob. 84RECh. 19 - Prob. 85RECh. 19 - Prob. 86RECh. 19 - Prob. 87RECh. 19 - Prob. 88RECh. 19 - In Exercises 51–98, solve the given problems by...Ch. 19 - Prob. 90RECh. 19 - Prob. 91RECh. 19 - Prob. 92RECh. 19 - Prob. 93RECh. 19 - Prob. 94RECh. 19 - Prob. 95RECh. 19 - Prob. 96RECh. 19 - Prob. 97RECh. 19 - Prob. 98RECh. 19 - Prob. 99RECh. 19 - Prob. 1PTCh. 19 - Prob. 2PTCh. 19 - Prob. 3PTCh. 19 - Prob. 4PTCh. 19 - Prob. 5PTCh. 19 - Prob. 6PTCh. 19 - Prob. 7PTCh. 19 - Prob. 8PTCh. 19 - Prob. 9PT
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- We consider a 4-dimensional stock price model given (under P) by dẴ₁ = µ· Xt dt + йt · ΣdŴt where (W) is an n-dimensional Brownian motion, π = (0.02, 0.01, -0.02, 0.05), 0.2 0 0 0 0.3 0.4 0 0 Σ= -0.1 -4a За 0 0.2 0.4 -0.1 0.2) and a E R. We assume that ☑0 = (1, 1, 1, 1) and that the interest rate on the market is r = 0.02. (a) Give a condition on a that would make stock #3 be the one with largest volatility. (b) Find the diversification coefficient for this portfolio as a function of a. (c) Determine the maximum diversification coefficient d that you could reach by varying the value of a? 2arrow_forwardQuestion 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…arrow_forwardIn 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.)arrow_forward
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