Discrete Mathematics with Graph Theory (Classic Version) (3rd Edition) (Pearson Modern Classics for Advanced Mathematics Series)
3rd Edition
ISBN: 9780134689555
Author: Edgar Goodaire, Michael Parmenter
Publisher: PEARSON
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Chapter 2.2, Problem 23E
To determine
The simplified form of
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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.)
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 2 Solutions
Discrete Mathematics with Graph Theory (Classic Version) (3rd Edition) (Pearson Modern Classics for Advanced Mathematics Series)
Ch. 2.1 - 5{x+2y|x{0,1,2},y{2,0,2}}Ch. 2.1 - 5{x+2y|x{0,1,2},y{2,0,2}}Ch. 2.1 - If A={a,b}, then bA.Ch. 2.1 - Prob. 4TFQCh. 2.1 - {,{}}Ch. 2.1 - {,{}}Ch. 2.1 - True/False Questions
7.
Ch. 2.1 - Prob. 8TFQCh. 2.1 - (Assume A and B are sets). ABBA.Ch. 2.1 - If A has two elements, then P(P(A)) has eight...
Ch. 2.1 - Prob. 1ECh. 2.1 - 2. List five elements in each of the following...Ch. 2.1 - Let A={1,2,3,4}. List all the subsets B of A such...Ch. 2.1 - 4. Let . Are the following statements true or...Ch. 2.1 - 5. Determine which of the following are true and...Ch. 2.1 - Prob. 6ECh. 2.1 - Determine which of the following are true and...Ch. 2.1 - Prob. 8ECh. 2.1 - a) List all the subset of set {a,b,c,d} that...Ch. 2.1 - (a) How many elements are in the power set of the...Ch. 2.1 - Prob. 11ECh. 2.1 - Prob. 12ECh. 2.1 - Prob. 13ECh. 2.1 - Prob. 14ECh. 2.2 - Prob. 1TFQCh. 2.2 - Prob. 2TFQCh. 2.2 - Prob. 3TFQCh. 2.2 - Prob. 4TFQCh. 2.2 - If A and B are setsand AB, then AB.Ch. 2.2 - Prob. 6TFQCh. 2.2 - The name of Augustus De Morgan appears in both...Ch. 2.2 - (AC)(BcAc).Ch. 2.2 - True/False Questions
9.
Ch. 2.2 - Prob. 10TFQCh. 2.2 - List A={xN|x7},B={xZ||x2|4} and C={xR|x34x=0}:...Ch. 2.2 - Prob. 2ECh. 2.2 - Prob. 3ECh. 2.2 - Prob. 4ECh. 2.2 - For A={a,b,c,{a,b}}, find (a) A{a,b} (b) {}P(A)...Ch. 2.2 - Prob. 6ECh. 2.2 - 7. Let , and . List the elements in the...Ch. 2.2 - Let n3 and A={1,2,3,.....n}. (a) How many subsets...Ch. 2.2 - Prob. 9ECh. 2.2 - 10. The universal set for this problem is the set...Ch. 2.2 - Prob. 11ECh. 2.2 - 12. Let P denote the set of primes and E the set...Ch. 2.2 - For nZ, let An={aZ|an}. Find each of the following...Ch. 2.2 - Prob. 14ECh. 2.2 - 15. Let , and .
(a) Draw a Venn diagram showing...Ch. 2.2 - Prob. 16ECh. 2.2 - Prob. 17ECh. 2.2 - Prob. 18ECh. 2.2 - Prob. 19ECh. 2.2 - Prob. 20ECh. 2.2 - Prob. 21ECh. 2.2 - Prob. 22ECh. 2.2 - Prob. 23ECh. 2.2 - Prob. 24ECh. 2.2 - Prob. 25ECh. 2.2 - Prob. 26ECh. 2.2 - Prob. 27ECh. 2.2 - Prob. 28ECh. 2.2 - Prob. 29ECh. 2.2 - Prob. 30ECh. 2.2 - Prob. 31ECh. 2.3 - {(x,x+1)|xN} is a binary relation on N, the set of...Ch. 2.3 - True/False Questions
2. is a binary relation on...Ch. 2.3 - Let be a binary relation on a set A and let aA....Ch. 2.3 - Let R be a binary relation on a set A and let aA....Ch. 2.3 - Let R be a binary relation on a set A. If R is not...Ch. 2.3 - True/False Questions
6. Let be a binary relation...Ch. 2.3 - True/False Questions
7. Let be a binary relation...Ch. 2.3 - If a binary relation R is antisymmetric, then R is...Ch. 2.3 - If a binary relation R is notsymmetric, then it is...Ch. 2.3 - True/False Questions
10. Let be a binary relation...Ch. 2.3 - Let B denote the set of books in a college library...Ch. 2.3 - 2. Let A denote the set of names of streets in St....Ch. 2.3 - Determine which of the properties reflexive,...Ch. 2.3 - 4. With a table like that in Fig. 2.2, illustrate...Ch. 2.3 - 5. Let . List the ordered pairs in a relation on A...Ch. 2.3 - 6. Is it possible for a binary relation to be both...Ch. 2.3 - What is wrong with the following argument, which...Ch. 2.3 - Determine whether each of the binary relations R...Ch. 2.3 - Determine whether each of the binary relations R...Ch. 2.3 - Prob. 10ECh. 2.3 - Prob. 11ECh. 2.3 - Prob. 12ECh. 2.3 - Prob. 13ECh. 2.4 - True/False Questions
“” defines an equivalence...Ch. 2.4 - An equivalence relation on a set A is a binary...Ch. 2.4 - Prob. 3TFQCh. 2.4 - Prob. 4TFQCh. 2.4 - Prob. 5TFQCh. 2.4 - Prob. 6TFQCh. 2.4 - Prob. 7TFQCh. 2.4 - Prob. 8TFQCh. 2.4 - Prob. 9TFQCh. 2.4 - Prob. 10TFQCh. 2.4 - Prob. 11TFQCh. 2.4 - Prob. 1ECh. 2.4 - 2. Explain why each of the following binary...Ch. 2.4 - Prob. 3ECh. 2.4 - Prob. 4ECh. 2.4 - Prob. 5ECh. 2.4 - For natural numbers a and b, define a~b if and...Ch. 2.4 - Prob. 7ECh. 2.4 - 8. For integers a, b, define if and only if for...Ch. 2.4 - 9. Define ~ on Z by if and only if is a multiple...Ch. 2.4 - 10. For integers a and b, define if for some...Ch. 2.4 - 11. For , define if and only if .
(a) Prove that...Ch. 2.4 - For a,bZ, define a~b if and only if a2b2 is...Ch. 2.4 - Prob. 13ECh. 2.4 - Prob. 14ECh. 2.4 - Prob. 15ECh. 2.4 - Define ~ on R2 by (x,y)~(u,v) if and only if...Ch. 2.4 - Prob. 17ECh. 2.4 - Determine which of the following define...Ch. 2.4 - Prob. 19ECh. 2.4 - Prob. 20ECh. 2.4 - Prob. 21ECh. 2.4 - 22. Let A be the set of all natural numbers and ~...Ch. 2.4 - Prob. 23ECh. 2.4 - Prob. 24ECh. 2.4 - Prob. 25ECh. 2.5 - A partial order on a set A is a reflexive,...Ch. 2.5 - Prob. 2TFQCh. 2.5 - True/False Questions
3. The binary relation “” on...Ch. 2.5 - Prob. 4TFQCh. 2.5 - Hasse diagrams are used to identify the...Ch. 2.5 - Prob. 6TFQCh. 2.5 - Prob. 7TFQCh. 2.5 - Prob. 8TFQCh. 2.5 - Prob. 9TFQCh. 2.5 - The statement in Question 9 is the contrapositive...Ch. 2.5 - 1. Determine whether each of the following...Ch. 2.5 - 2. (a) List the elements of the set in...Ch. 2.5 - List all pairs (x,y) with xy in the partial orders...Ch. 2.5 - Prob. 4ECh. 2.5 - Prob. 5ECh. 2.5 - Prob. 6ECh. 2.5 - In the poset (P(S),) of subsets of a set S, under...Ch. 2.5 - Prob. 8ECh. 2.5 - Prob. 9ECh. 2.5 - 10. (a) Let and, for and in A, define if and...Ch. 2.5 - Prob. 11ECh. 2.5 - Prob. 12ECh. 2.5 - Prob. 13ECh. 2.5 - Prob. 14ECh. 2.5 - Prob. 15ECh. 2.5 - Prob. 16ECh. 2.5 - Prob. 17ECh. 2.5 - Prob. 18ECh. 2 - If A={xN|x7},B={xZ||x5|3}andC={2,3}, find (AB)C.Ch. 2 - Let A={xZ|1x2},B={2x3|xA},andC={xR|x=ab,aA,bB}....Ch. 2 - Prob. 3RECh. 2 - Prob. 4RECh. 2 - 5. This exercise refers to the Venn diagram shown...Ch. 2 - Prob. 6RECh. 2 - Let A={1}. Find P(P(A)).Ch. 2 - Prob. 8RECh. 2 - Give an example showing that the statement...Ch. 2 - Prob. 10RECh. 2 - 11. Let A be a set.
(a) What is meant by the term...Ch. 2 - Let A={xR||x|1} and, for a,bA, define (a,b)R if...Ch. 2 - Determine whether ~ is reflexive, symmetric,...Ch. 2 - For a,bN, define a~b if and only if ab. Determine...Ch. 2 - 15. Define a relation R on Z by if is a multiple...Ch. 2 - 16. Define a relation R on Z by if is a multiple...Ch. 2 - 17. Let ~ denote an equivalence relation on a set...Ch. 2 - 18. Let ~ denote an equivalence relation on a set...Ch. 2 - Prob. 19RECh. 2 - Let A be the set of points different from the...Ch. 2 - Show that (P(Z),) is a partially ordered set.Ch. 2 - Let A={1,2,4,6,8} and, for a,bA, define a_b if and...Ch. 2 - 23. Let be a poset and . Can a and b have two...
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