MATLAB: An Introduction with Applications, 6th Edition: An Introduction with Applications
6th Edition
ISBN: 9781119385134
Author: Amos Gilat
Publisher: WILEY
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Chapter 2, Problem 23P
Create a nine-element row
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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 2 Solutions
MATLAB: An Introduction with Applications, 6th Edition: An Introduction with Applications
Ch. 2 - Prob. 1PCh. 2 - Create a variable b that is a row vector with the...Ch. 2 - Create a variable c that is a colums vector with...Ch. 2 - Create a variable d that is a column vectorwith...Ch. 2 - Define the variables x= 3.4 and y= 5.8, and then...Ch. 2 - Define the variables c = 4.5 and d = 2.8, and then...Ch. 2 - Create a variable g that is a row vector in which...Ch. 2 - Create a variable h that is a row vector with...Ch. 2 - Create a variable M that is a column vector in...Ch. 2 - Create a variable N that is a column vector with...
Ch. 2 - Using the colon symbol, create a row vector...Ch. 2 - Using the linspace command, create a row vector...Ch. 2 - Using the colon symbol, create a variable named...Ch. 2 - Use a single command to create a row vector...Ch. 2 - Use a single command to create a row vector...Ch. 2 - Use a single command to create a row vector...Ch. 2 - Create two row vectors v=41:-3:29 and w=17:4:37....Ch. 2 - Create two column vectors T= [5:5:25]’ and S=...Ch. 2 - Create a row vectors A=4:3:13 and a column vector...Ch. 2 - Create a row vector vA=1: 3 : 34 that has 12...Ch. 2 - Create a row vector vC=2 :3 :38 that has 13...Ch. 2 - Create two row vectors vD=20 :4 :44 and vE=50 :3...Ch. 2 - Create a nine-element row vector vF=5 : 7: 61....Ch. 2 - Create the following matrix by assigning vectors...Ch. 2 - Create the following vector by using the linspace...Ch. 2 - Create the following matrix by typing one command....Ch. 2 - Create the following matrix by typing one command....Ch. 2 - Create the following matrix by typing one command....Ch. 2 - Create the following matrix by typing one command....Ch. 2 - Create the following matrix by typing one command....Ch. 2 - Create the following three row vectors: a=[58102]...Ch. 2 - Create the following three row vectors: a= [5 8 -1...Ch. 2 - Create the following to row vectors: d=[6-1 4 0 -2...Ch. 2 - Prob. 34PCh. 2 - Create the following vector: V=[5 0 -3 7 6 -1 2 8...Ch. 2 - Create the following vectors: u= [0 9 -5 6 3 -1 2]...Ch. 2 - Create the following matrix M: M= 1 7 13 19 25 3 9...Ch. 2 - Create the following matrix N: N= 0 3 6 9 12 15 18...Ch. 2 - Create the following matrix G: G= 0.1 0.2 0.3 0.4...Ch. 2 - Create the following matrix K: K= 0.25 0.5 0.75...Ch. 2 - The following matrix is defined in MATLAB: S= 1 2...Ch. 2 - The following matrix is defined in MATLAB: T= 2 4...Ch. 2 - By hand (pencil and paper) write what will be...Ch. 2 - Using the zeros, ones, and eye commands, create...Ch. 2 - Use the eye, ones, and zeros command to create the...
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