Statistics- Unlocking The Power Of Data
2nd Edition
ISBN: 9781119308843
Author: Lock
Publisher: WILEY
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Chapter 2.1, Problem 15E
a.
To determine
Identify the sample in this case.
Find the population.
Obtain what does the variable measure.
b.
To determine
Construct a relative frequency table of the results.
c.
To determine
Identify the option that one should play if the selected person wants the odds in favor.
d.
To determine
Identify the option that one should pick for the next round if the opponent just played paper.
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Students have asked these similar questions
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?
2
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.)
Chapter 2 Solutions
Statistics- Unlocking The Power Of Data
Ch. 2.1 - Exercises 2.1 to 2.4 provide information about...Ch. 2.1 - Exercises 2.1 to 2.4 provide information about...Ch. 2.1 - Prob. 3ECh. 2.1 - Prob. 4ECh. 2.1 - Prob. 5ECh. 2.1 - Prob. 6ECh. 2.1 - Prob. 7ECh. 2.1 - Prob. 8ECh. 2.1 - Prob. 9ECh. 2.1 - Prob. 10E
Ch. 2.1 - In Exercises 2.11 and 2.12, a two-way table is...Ch. 2.1 - Prob. 12ECh. 2.1 - Prob. 13ECh. 2.1 - Prob. 14ECh. 2.1 - Prob. 15ECh. 2.1 - Prob. 16ECh. 2.1 - Prob. 17ECh. 2.1 - Prob. 18ECh. 2.1 - Prob. 19ECh. 2.1 - Culture and Mental Illness A recent study13...Ch. 2.1 - Prob. 21ECh. 2.1 - Prob. 22ECh. 2.1 - Prob. 23ECh. 2.1 - Prob. 24ECh. 2.1 - Electrical Stimulation for Fresh Insight? If we...Ch. 2.1 - Exercises 2.26 to 2.29 use data on college...Ch. 2.1 - Prob. 27ECh. 2.1 - How Accurate Are Student Perceptions? Students in...Ch. 2.1 - Prob. 29ECh. 2.1 - Prob. 30ECh. 2.1 - Prob. 31ECh. 2.1 - Prob. 32ECh. 2.1 - Prob. 33ECh. 2.1 - Prob. 34ECh. 2.1 - Prob. 35ECh. 2.1 - Prob. 36ECh. 2.1 - Prob. 37ECh. 2.1 - Prob. 38ECh. 2.1 - Prob. 39ECh. 2.1 - Prob. 40ECh. 2.1 - Prob. 41ECh. 2.2 - Exercises 2.42 to 2.48 refer to histograms A...Ch. 2.2 - Prob. 43ECh. 2.2 - Prob. 44ECh. 2.2 - Exercises 2.42 to 2.48 refer to histograms A...Ch. 2.2 - Prob. 46ECh. 2.2 - For each of the four histograms E, F, G, and H,...Ch. 2.2 - Prob. 48ECh. 2.2 - In Exercises 2.49 to 2.52, draw any dotplot to...Ch. 2.2 - Prob. 50ECh. 2.2 - Prob. 51ECh. 2.2 - Prob. 52ECh. 2.2 - Prob. 53ECh. 2.2 - Prob. 54ECh. 2.2 - Prob. 55ECh. 2.2 - Prob. 56ECh. 2.2 - Prob. 57ECh. 2.2 - Prob. 58ECh. 2.2 - Prob. 59ECh. 2.2 - Prob. 60ECh. 2.2 - Prob. 61ECh. 2.2 - Prob. 62ECh. 2.2 - Prob. 63ECh. 2.2 - Prob. 64ECh. 2.2 - Prob. 65ECh. 2.2 - Prob. 66ECh. 2.2 - Prob. 67ECh. 2.2 - Prob. 68ECh. 2.2 - Donating Blood to Grandma? Can young blood help...Ch. 2.2 - Prob. 70ECh. 2.2 - Prob. 71ECh. 2.2 - Prob. 72ECh. 2.2 - Prob. 73ECh. 2.2 - Prob. 74ECh. 2.2 - Prob. 75ECh. 2.2 - Prob. 76ECh. 2.2 - Prob. 77ECh. 2.3 - For the datasets in Exercises 2.78 to 2.83, use...Ch. 2.3 - Prob. 79ECh. 2.3 - Prob. 80ECh. 2.3 - Prob. 81ECh. 2.3 - Prob. 82ECh. 2.3 - Prob. 83ECh. 2.3 - Prob. 84ECh. 2.3 - Prob. 85ECh. 2.3 - Prob. 86ECh. 2.3 - Prob. 87ECh. 2.3 - Prob. 88ECh. 2.3 - Prob. 89ECh. 2.3 - Prob. 90ECh. 2.3 - Prob. 91ECh. 2.3 - Prob. 92ECh. 2.3 - Prob. 93ECh. 2.3 - Prob. 94ECh. 2.3 - Prob. 95ECh. 2.3 - Prob. 96ECh. 2.3 - In Exercises 2.94 to 2.97, indicate whether the...Ch. 2.3 - Prob. 98ECh. 2.3 - Prob. 99ECh. 2.3 - Prob. 100ECh. 2.3 - Prob. 101ECh. 2.3 - Prob. 102ECh. 2.3 - Prob. 103ECh. 2.3 - Prob. 104ECh. 2.3 - Prob. 105ECh. 2.3 - Prob. 106ECh. 2.3 - Prob. 107ECh. 2.3 - Prob. 108ECh. 2.3 - Prob. 109ECh. 2.3 - Prob. 110ECh. 2.3 - Prob. 111ECh. 2.3 - Prob. 112ECh. 2.3 - Laptop Computers and Sperm Count Studies have...Ch. 2.3 - Prob. 114ECh. 2.3 - Prob. 115ECh. 2.3 - Prob. 116ECh. 2.3 - Prob. 117ECh. 2.3 - Which Accomplishment of LeBron James Is Most...Ch. 2.3 - Prob. 119ECh. 2.3 - Prob. 120ECh. 2.3 - Prob. 121ECh. 2.3 - Largest and Smallest Standard Deviation Using only...Ch. 2.3 - Prob. 123ECh. 2.3 - Prob. 124ECh. 2.3 - Prob. 125ECh. 2.3 - Prob. 126ECh. 2.3 - Prob. 127ECh. 2.3 - Prob. 128ECh. 2.3 - Prob. 129ECh. 2.3 - Prob. 130ECh. 2.4 - In Exercises 2.131 and 2.132, match the five...Ch. 2.4 - Prob. 132ECh. 2.4 - Prob. 133ECh. 2.4 - Prob. 134ECh. 2.4 - Prob. 135ECh. 2.4 - Exercises 2.133 to 2.136 show a boxplot for a set...Ch. 2.4 - Prob. 137ECh. 2.4 - Prob. 138ECh. 2.4 - Prob. 139ECh. 2.4 - Prob. 140ECh. 2.4 - Literacy Rate Figure 2.39 gives a boxplot showing...Ch. 2.4 - Young Blood Helps Old Brains Exercise 2.69 on page...Ch. 2.4 - Prob. 143ECh. 2.4 - Prob. 144ECh. 2.4 - Prob. 145ECh. 2.4 - Audience Scores on Rotten Tomatoes The variable...Ch. 2.4 - Do Movie Budgets Differ Based on the Genre of the...Ch. 2.4 - Do Audience Ratings Differ Based on the Genre of...Ch. 2.4 - Physical Activity by Region of the Country in the...Ch. 2.4 - Prob. 150ECh. 2.4 - Prob. 151ECh. 2.4 - How Do Honeybees Communicate Quality? When...Ch. 2.4 - Prob. 153ECh. 2.4 - Prob. 154ECh. 2.4 - Prob. 155ECh. 2.4 - Prob. 156ECh. 2.4 - Prob. 157ECh. 2.4 - Prob. 158ECh. 2.4 - Prob. 159ECh. 2.5 - Match the scatterplots in Figure 2.54 with the...Ch. 2.5 - Match the scatterplots in Figure 2.54 with the...Ch. 2.5 - Prob. 162ECh. 2.5 - Prob. 163ECh. 2.5 - Prob. 164ECh. 2.5 - Prob. 165ECh. 2.5 - Prob. 166ECh. 2.5 - Prob. 167ECh. 2.5 - Prob. 168ECh. 2.5 - Prob. 169ECh. 2.5 - Prob. 170ECh. 2.5 - Prob. 171ECh. 2.5 - Prob. 172ECh. 2.5 - Prob. 173ECh. 2.5 - Prob. 174ECh. 2.5 - Prob. 175ECh. 2.5 - Prob. 176ECh. 2.5 - Prob. 177ECh. 2.5 - Prob. 178ECh. 2.5 - Mother’s Love, Hippocampus, and Resiliency...Ch. 2.5 - Prob. 180ECh. 2.5 - Prob. 181ECh. 2.5 - Prob. 182ECh. 2.5 - Prob. 183ECh. 2.5 - Prob. 184ECh. 2.5 - Prob. 185ECh. 2.5 - Prob. 186ECh. 2.5 - Prob. 187ECh. 2.5 - Prob. 188ECh. 2.5 - Prob. 189ECh. 2.5 - Prob. 190ECh. 2.5 - Prob. 191ECh. 2.5 - Prob. 192ECh. 2.5 - Prob. 193ECh. 2.5 - Prob. 194ECh. 2.5 - Iris Petals Allometry is the area of biology that...Ch. 2.5 - Create a Scatterplot Draw any scatterplot...Ch. 2.5 - Prob. 197ECh. 2.5 - Do Movies with Larger Budgets Get Higher Audience...Ch. 2.5 - Prob. 199ECh. 2.6 - In Exercises 2.200 to 2.203, two variables are...Ch. 2.6 - Prob. 201ECh. 2.6 - Prob. 202ECh. 2.6 - Prob. 203ECh. 2.6 - Prob. 204ECh. 2.6 - Prob. 205ECh. 2.6 - Use technology to find the regression line to...Ch. 2.6 - Prob. 207ECh. 2.6 - Prob. 208ECh. 2.6 - Prob. 209ECh. 2.6 - Is It Getting Harder to Win a Hot Dog Eating...Ch. 2.6 - Prob. 211ECh. 2.6 - Football and Cognitive Percentile Exercise 2.143...Ch. 2.6 - Prob. 213ECh. 2.6 - Prob. 214ECh. 2.6 - Prob. 215ECh. 2.6 - Height and Weight Using the data in the...Ch. 2.6 - Prob. 217ECh. 2.6 - Prob. 218ECh. 2.6 - Prob. 219ECh. 2.6 - Prob. 220ECh. 2.6 - Prob. 221ECh. 2.6 - Prob. 222ECh. 2.6 - Prob. 223ECh. 2.6 - Prob. 224ECh. 2.6 - Prob. 225ECh. 2.7 - Prob. 226ECh. 2.7 - Prob. 227ECh. 2.7 - Prob. 228ECh. 2.7 - Visualizing Football and Brain Size Exercise 2.143...Ch. 2.7 - Prob. 230ECh. 2.7 - Prob. 231ECh. 2.7 - Prob. 232ECh. 2.7 - Prob. 233ECh. 2.7 - Prob. 236ECh. 2.7 - Prob. 237ECh. 2.7 - Prob. 239ECh. 2.7 - Prob. 240ECh. 2.7 - Prob. 241ECh. 2.7 - Prob. 244ECh. 2.7 - Prob. 245ECh. 2.7 - Prob. 246ECh. 2.7 - Prob. 247ECh. 2.7 - Prob. 248ECh. 2.7 - Prob. 249ECh. 2.7 - Prob. 250ECh. 2.7 - Prob. 251ECh. 2.7 - Prob. 252ECh. 2.7 - Prob. 253ECh. 2.7 - Prob. 254ECh. 2.7 - Prob. 256ECh. 2.7 - Prob. 257ECh. 2.7 - Prob. 258ECh. 2.7 - Prob. 259ECh. 2.7 - Prob. 260ECh. 2.7 - Prob. 268E
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