Bundle: Understanding Basic Statistics, Loose-leaf Version, 8th + WebAssign Printed Access Card, Single-Term
8th Edition
ISBN: 9781337888981
Author: Charles Henry Brase, Corrinne Pellillo Brase
Publisher: Cengage Learning
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Textbook Question
Chapter 2.1, Problem 15P
For Problems 15-20. use the specified number of classes to do the following.
(a) Find the class width
(b) Make a frequency table showing class limits, class boundaries, midpoints, frequencies. relative frequencies, and cumulative frequencies.
(c) Draw a histogram.
(d) Draw a relative- frequency histogram.
(e) Categorize the basic distribution shape as uniform, mound-shaped symmetric, binodal, skewed left, orskewed right.
(f) Draw an ogive.
(g) Interpretation Discuss some of the features about the data that the graphs reveal. Consider items such as dat
Sports: DogsledRacing How long does it take to finish the 1161-mile Iditarod Sled Dog Race from Anchorage to Nome. Alaska (see Viewpoint)? Finish times (to the nearest hour) for 57 dogsled teams are shown below.
| 261 | 271 | 236 | 244 | 279 | 296 | 284 | 299 | 288 | 288 | 247 | 256 |
| 338 | 360 | 341 | 333 | 261 | 266 | 247 | 296 | 313 | 311 | 307 | 307 |
| 209 | 306 | 277 | 283 | 304 | 305 | 288 | 290 | 288 | 289 | 297 | 299 |
| 332 | 330 | 309 | 328 | 307 | 328 | 245 | 291 | 295 | 298 | 306 | 315 |
| 310 | 318 | 318 | 320 | 333 | 321 | 323 | 324 | 327 |
Use five classes.
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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?
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
Bundle: Understanding Basic Statistics, Loose-leaf Version, 8th + WebAssign Printed Access Card, Single-Term
Ch. 2.1 - Statistical Literacy What is the difference...Ch. 2.1 - Statistical Literacy A data set has values ranging...Ch. 2.1 - Statistical Literacy A data set has values ranging...Ch. 2.1 - Statistical Literacy A data set has value ranging...Ch. 2.1 - Basic Computation: Class Limits A data set with...Ch. 2.1 - Basic Computation: Class limits A data set with...Ch. 2.1 - Interpretation You are manager of a specialty...Ch. 2.1 - Critical Thinking A web site rated 100 colleges...Ch. 2.1 - Critical Thinking Look at the histogram in Figure...Ch. 2.1 - Critical Thinking The following data represent...
Ch. 2.1 - Interpretation Histograms of random sample data...Ch. 2.1 - Interpretation The following histograms are based...Ch. 2.1 - Interpretation The ogives shown are based on U.S...Ch. 2.1 - Critical Thinking The following ogives come from...Ch. 2.1 - For Problems 15-20. use the specified number of...Ch. 2.1 - For Problems 15-20, use the specified number of...Ch. 2.1 - For Problems 15-20, use the specified number of...Ch. 2.1 - For Problems 15-20, use the specified number of...Ch. 2.1 - For Problems 15-20, use the specified number of...Ch. 2.1 - For Problems 15-20. use the specified number of...Ch. 2.1 - Expand Your knowledge: Decimal Data The fallowing...Ch. 2.1 - Decimal Data: Batting Averages The following data...Ch. 2.1 - Expand Your Knowledge: Dotplot another display...Ch. 2.1 - 24. Dotplot: Sled Dog Racing Make a dotplot for...Ch. 2.1 - Prob. 25PCh. 2.2 - 1. Interpretation Consider graph (a) of Reasons...Ch. 2.2 - Interpretation Look at graph (b) of Reasons People...Ch. 2.2 - Critical Thinking A personnel office is gathering...Ch. 2.2 - Critical Thinking Your friend is thinking about...Ch. 2.2 - Education: Does College Pay Off? It is costly in...Ch. 2.2 - Interpretation Consider the two graphs depicting...Ch. 2.2 - Commercial Fishing: Gulf of Alaska It's not an...Ch. 2.2 - Archaeology: Ireland Commercial dredging...Ch. 2.2 - Lifestyle: Hide the Mess! A survey of 1000 adults...Ch. 2.2 - Education: College Professors' Time How do college...Ch. 2.2 - FBI Report: Hawaii In the Aloha state, you are...Ch. 2.2 - Driving: Bad Habits Driving would be more pleasant...Ch. 2.2 - 13Ecology: Lakes Pyramid Lake, Nevada, is...Ch. 2.2 - Vital Statistics: Height How dies average height...Ch. 2.2 - Expand Your Knowledge Donut Pie Charts The book...Ch. 2.2 - Technology: Cars The following cluster bar graph...Ch. 2.3 - Cowboys: Longevity How long did real cowboys live?...Ch. 2.3 - Ecology: Habitat Wetlands offer a diversity of...Ch. 2.3 - Health Care: Hospitals The American Medical...Ch. 2.3 - Health Care: Hospitals Using the number of...Ch. 2.3 - Expand Your knowledge: Split Stem The Boston...Ch. 2.3 - Split Stem: Golf The U.S. Open Golf Tournament was...Ch. 2.3 - Are cigarettes bad for people? Cigarette smoking...Ch. 2.3 - Are cigarettes bad for people? Cigarette smoking...Ch. 2.3 - Are cigarettes bad for people? Cigarette smoking...Ch. 2.3 - Expand Your Knowledge: Back-to-Back Stem Plot In...Ch. 2 - Terminology Consider the following graph types:...Ch. 2 - Terminology Whichtype(s) of data can be shown in a...Ch. 2 - Terminology Which type(s) of data can be shown in...Ch. 2 - Terminology Which graphical display shows each...Ch. 2 - Terminology If a histogram is skewed left, more of...Ch. 2 - Terminology How are data plotted in a time-series...Ch. 2 - Critical Thinking Consider these types of graphs:...Ch. 2 - Critical Thinking A consumer interest group is...Ch. 2 - Critical Thinking Describe how data outliers might...Ch. 2 - Expand Your Knowledge How are dotplots and...Ch. 2 - Focus Problem: Fuel Economy Solve the focus...Ch. 2 - Criminal Justice: Prisoners The time plot in...Ch. 2 - IRS: Tax Returns Almost everyone files (or will...Ch. 2 - Law Enforcement: DUI Driving under the influence...Ch. 2 - Agriculture: Apple Trees The following data...Ch. 2 - Law: Corporation Lawsuits Many people say the...Ch. 2 - Archaeology: Tree-King DataThe Sand Canyon...Ch. 2 - Interpretation A Harm Poll surveyed 2085 U.S....Ch. 2 - Examine Figure 2-20, Everyone Agrees: Slobs Make...Ch. 2 - Examine Figure 2-21, Global Teen Worries. How many...Ch. 2 - In your own words, explain the differences among...Ch. 2 - What do we mean when we say a histogram is skewed...Ch. 2 - Discuss the statement that stem-and-leaf displays...Ch. 2 - The following tables show the first-round winning...Ch. 2 - The following tables show the first-round winning...Ch. 2 - The Following tables show the first-round winning...
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