PRACT STAT W/ ACCESS 6MO LOOSELEAF
PRACT STAT W/ ACCESS 6MO LOOSELEAF
4th Edition
ISBN: 9781319215361
Author: BALDI
Publisher: Macmillan Higher Education
Question
Book Icon
Chapter 28, Problem 28.1AYK
To determine

To write a population regression model that describe this setting and explain in words what each β in your model means.

Expert Solution & Answer
Check Mark

Explanation of Solution

In the question, it is given that suppose that the number y of new birds that join a colony this year has the same straight line relationship with the percent x1 of returning birds in colonies for two different bird species. An indicator variable shows which species we observe; x2=0 for one and x2=1 for the other. Let us consider the population regression model be as:

  μy=β0+β1x1+β2x2

Where the number y is new birds that join a colony this year, x1 isthe percent of returning birds in colonies and the indicator x2 is the different species of bird returning with x2=0 for one and x2=1 for the other. So, for the one species with x2=0 for one, the model becomes,

  μy=β0+β1x1+β2x2=β0+β1x1+β2(0)=β0+β1x1

And for the other species with x2=1 for the other, the model becomes:

  μy=β0+β1x1+β2x2=β0+β1x1+β2(1)=β0+β1x1+β2=(β0+β2)+β1x1

And in these we can see that the slope that describes how the number of new birds that join a colony this year as percent x1 varies is β1 . The intercept differ: β0 for the one species and (β0+β2) for the other species. So, β2 is of particular interest because it is the fixed change between one and the other species of new birds that join a colony this year.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
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
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
MATLAB: An Introduction with Applications
Statistics
ISBN:9781119256830
Author:Amos Gilat
Publisher:John Wiley & Sons Inc
Text book image
Probability and Statistics for Engineering and th...
Statistics
ISBN:9781305251809
Author:Jay L. Devore
Publisher:Cengage Learning
Text book image
Statistics for The Behavioral Sciences (MindTap C...
Statistics
ISBN:9781305504912
Author:Frederick J Gravetter, Larry B. Wallnau
Publisher:Cengage Learning
Text book image
Elementary Statistics: Picturing the World (7th E...
Statistics
ISBN:9780134683416
Author:Ron Larson, Betsy Farber
Publisher:PEARSON
Text book image
The Basic Practice of Statistics
Statistics
ISBN:9781319042578
Author:David S. Moore, William I. Notz, Michael A. Fligner
Publisher:W. H. Freeman
Text book image
Introduction to the Practice of Statistics
Statistics
ISBN:9781319013387
Author:David S. Moore, George P. McCabe, Bruce A. Craig
Publisher:W. H. Freeman