Introductory Statistics (10th Edition)
10th Edition
ISBN: 9780321989178
Author: Neil A. Weiss
Publisher: PEARSON
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Textbook Question
Chapter 2.3, Problem 84E
For each data set in Exercises 2.80–2.91, use the specified grouping method to
- a. determine a frequency distribution.
- b. obtain a relative-frequency distribution.
- c. construct a frequency histogram based on your result from part (a).
- d. construct a relative-frequency histogram based on your result from part (b).
2.84 Residential Energy Consumption. The U.S. Energy Information Administration collects data on residential energy consumption and expenditures. Results are published in the document Residential Energy Consumption Survey: Consumption and Expenditures. The following table gives one year’s energy consumption for a sample of 50 households in the South. Data are in millions of BTUs. Use limit grouping with a first class of 40–49 and a class width of 10.
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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?
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
Chapter 2 Solutions
Introductory Statistics (10th Edition)
Ch. 2.1 - Give an example, other than those presented in...Ch. 2.1 - Explain the meaning of a. qualitative variable. b....Ch. 2.1 - Explain the meaning of a. qualitative data. b....Ch. 2.1 - Provide a reason why the classification of data is...Ch. 2.1 - Of the variables you have studied so far, which...Ch. 2.1 - For each part of Exercises 2.62.11, classify the...Ch. 2.1 - Earthquakes. The U.S. Geological Survey monitors...Ch. 2.1 - Top 10 IPOs. An online article from the Washington...Ch. 2.1 - Earnings from the Crypt. On the Celebrity NetWorth...Ch. 2.1 - World University Rankings. The Times Higher...
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