NATURE OF MATHEMATICS WEBASSIGN ACCESS
13th Edition
ISBN: 9780357127193
Author: SMITH
Publisher: CENGAGE L
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Chapter 2.CR, Problem 4CR
To determine
a)
To find:
To determine
b)
To find:
To determine
c)
To find:
To determine
d)
To verify:
Also to reason out the possibility of the result.
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Students have asked these similar questions
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.)
3. Consider the polynomial equation 6-iz+7z² - iz³ +z = 0 for which the roots are 3i, -2i, -i,
and i.
(a) Verify the relations between this roots and the coefficients of the polynomial.
(b) Find the annulus region in which the roots lie.
Chapter 2 Solutions
NATURE OF MATHEMATICS WEBASSIGN ACCESS
Ch. 2.1 - Prob. 1PSCh. 2.1 - IN YOUR OWN WORDS Distinguish between equal and...Ch. 2.1 - Prob. 3PSCh. 2.1 - Prob. 4PSCh. 2.1 - Tell whether each set in Problems 5-8 is well...Ch. 2.1 - Prob. 6PSCh. 2.1 - Tell whether each set in Problems 5-8 is well...Ch. 2.1 - Tell whether each set in Problems 5-8 is well...Ch. 2.1 - Specify the sets in Problems 9-14 by roster. a....Ch. 2.1 - Specify the sets in Problems 9-14 by roster. a....
Ch. 2.1 - Prob. 11PSCh. 2.1 - Prob. 12PSCh. 2.1 - Specify the sets in Problems 9-14 by roster. a....Ch. 2.1 - Specify the sets in Problems 9-14 by roster. a....Ch. 2.1 - Prob. 15PSCh. 2.1 - Prob. 16PSCh. 2.1 - Prob. 17PSCh. 2.1 - Prob. 18PSCh. 2.1 - Prob. 19PSCh. 2.1 - Prob. 20PSCh. 2.1 - Prob. 21PSCh. 2.1 - Prob. 22PSCh. 2.1 - Prob. 23PSCh. 2.1 - Prob. 24PSCh. 2.1 - Prob. 25PSCh. 2.1 - Prob. 26PSCh. 2.1 - Prob. 27PSCh. 2.1 - Prob. 28PSCh. 2.1 - Prob. 29PSCh. 2.1 - Prob. 30PSCh. 2.1 - Prob. 31PSCh. 2.1 - Prob. 32PSCh. 2.1 - Prob. 33PSCh. 2.1 - Prob. 34PSCh. 2.1 - Prob. 35PSCh. 2.1 - Prob. 36PSCh. 2.1 - Prob. 37PSCh. 2.1 - Prob. 38PSCh. 2.1 - Prob. 39PSCh. 2.1 - Prob. 40PSCh. 2.1 - Prob. 41PSCh. 2.1 - Prob. 42PSCh. 2.1 - Prob. 43PSCh. 2.1 - Prob. 44PSCh. 2.1 - Prob. 45PSCh. 2.1 - Prob. 46PSCh. 2.1 - Prob. 47PSCh. 2.1 - Prob. 48PSCh. 2.1 - Prob. 49PSCh. 2.1 - Decide whether each statement in Problems 46-54 is...Ch. 2.1 - Prob. 51PSCh. 2.1 - Prob. 52PSCh. 2.1 - Prob. 53PSCh. 2.1 - Prob. 54PSCh. 2.1 - Prob. 55PSCh. 2.1 - Prob. 56PSCh. 2.1 - Prob. 57PSCh. 2.1 - Five people plan to meet after school, and if they...Ch. 2.1 - Prob. 59PSCh. 2.1 - Prob. 60PSCh. 2.2 - Prob. 1PSCh. 2.2 - Prob. 2PSCh. 2.2 - Prob. 3PSCh. 2.2 - Prob. 4PSCh. 2.2 - Prob. 5PSCh. 2.2 - Prob. 6PSCh. 2.2 - Prob. 7PSCh. 2.2 - Prob. 8PSCh. 2.2 - Prob. 9PSCh. 2.2 - Prob. 10PSCh. 2.2 - Prob. 11PSCh. 2.2 - Prob. 12PSCh. 2.2 - Prob. 13PSCh. 2.2 - Prob. 14PSCh. 2.2 - Prob. 15PSCh. 2.2 - Prob. 16PSCh. 2.2 - Prob. 17PSCh. 2.2 - Prob. 18PSCh. 2.2 - Prob. 19PSCh. 2.2 - Prob. 20PSCh. 2.2 - Prob. 21PSCh. 2.2 - Prob. 22PSCh. 2.2 - Prob. 23PSCh. 2.2 - Prob. 24PSCh. 2.2 - Prob. 25PSCh. 2.2 - Prob. 26PSCh. 2.2 - Prob. 27PSCh. 2.2 - Prob. 28PSCh. 2.2 - Prob. 29PSCh. 2.2 - Prob. 30PSCh. 2.2 - Prob. 31PSCh. 2.2 - Prob. 32PSCh. 2.2 - Prob. 33PSCh. 2.2 - Prob. 34PSCh. 2.2 - Prob. 35PSCh. 2.2 - Prob. 36PSCh. 2.2 - Prob. 37PSCh. 2.2 - Prob. 38PSCh. 2.2 - Prob. 39PSCh. 2.2 - Prob. 40PSCh. 2.2 - Prob. 41PSCh. 2.2 - Prob. 42PSCh. 2.2 - Prob. 43PSCh. 2.2 - Prob. 44PSCh. 2.2 - Prob. 45PSCh. 2.2 - Prob. 46PSCh. 2.2 - Prob. 47PSCh. 2.2 - Prob. 48PSCh. 2.2 - Draw Venn diagrams for each of the relationships...Ch. 2.2 - Prob. 50PSCh. 2.2 - Draw Venn diagrams for each of the relationships...Ch. 2.2 - Prob. 52PSCh. 2.2 - Prob. 53PSCh. 2.2 - Level 2 From a survey of 100 college students, a...Ch. 2.2 - Level 2 In a survey of a TriDelt chapter with 50...Ch. 2.2 - Prob. 56PSCh. 2.2 - Prob. 57PSCh. 2.2 - Santa Rosa Junior College enrolled 29,000 students...Ch. 2.2 - Prob. 59PSCh. 2.2 - Prob. 60PSCh. 2.3 - What do we mean by De Morgans laws?Ch. 2.3 - Prob. 2PSCh. 2.3 - Prob. 3PSCh. 2.3 - Prob. 4PSCh. 2.3 - Prob. 5PSCh. 2.3 - Prob. 6PSCh. 2.3 - Prob. 7PSCh. 2.3 - Prob. 8PSCh. 2.3 - Prob. 9PSCh. 2.3 - Prob. 10PSCh. 2.3 - Prob. 11PSCh. 2.3 - Prob. 12PSCh. 2.3 - Prob. 13PSCh. 2.3 - Prob. 14PSCh. 2.3 - Prob. 15PSCh. 2.3 - Prob. 16PSCh. 2.3 - Prob. 17PSCh. 2.3 - Prob. 18PSCh. 2.3 - Prob. 19PSCh. 2.3 - Prob. 20PSCh. 2.3 - Prob. 21PSCh. 2.3 - Prob. 22PSCh. 2.3 - Prob. 23PSCh. 2.3 - Prob. 24PSCh. 2.3 - Prob. 25PSCh. 2.3 - Prob. 26PSCh. 2.3 - Prob. 27PSCh. 2.3 - Prob. 28PSCh. 2.3 - Prob. 29PSCh. 2.3 - Prob. 30PSCh. 2.3 - Prob. 31PSCh. 2.3 - Prob. 32PSCh. 2.3 - Prob. 33PSCh. 2.3 - Prob. 34PSCh. 2.3 - Prob. 35PSCh. 2.3 - Draw a Venn diagram showing the relationship among...Ch. 2.3 - Prob. 37PSCh. 2.3 - Prob. 38PSCh. 2.3 - In Problems 3944, use set notation to identify the...Ch. 2.3 - In Problems 3944, use set notation to identify the...Ch. 2.3 - In Problems 3944, use set notation to identify the...Ch. 2.3 - Prob. 42PSCh. 2.3 - Prob. 43PSCh. 2.3 - Prob. 44PSCh. 2.3 - Prob. 45PSCh. 2.3 - Prob. 46PSCh. 2.3 - Prob. 47PSCh. 2.3 - Prob. 48PSCh. 2.3 - Prob. 49PSCh. 2.3 - Prob. 50PSCh. 2.3 - In a recent survey of 100 persons, the following...Ch. 2.3 - Matt E. Matic was applying for a job. To determine...Ch. 2.3 - A poll was taken of 100 students at a commuter...Ch. 2.3 - Prob. 54PSCh. 2.3 - Prob. 55PSCh. 2.3 - Prob. 56PSCh. 2.3 - The Venn diagram in Figure 2.17 shows five sets....Ch. 2.3 - Prob. 58PSCh. 2.3 - Prob. 59PSCh. 2.3 - Human blood is typed Rh + positive blood of Rh ...Ch. 2.4 - IN YOUR OWN WORDS Why do you think the fundamental...Ch. 2.4 - Prob. 2PSCh. 2.4 - Prob. 3PSCh. 2.4 - Prob. 4PSCh. 2.4 - Prob. 5PSCh. 2.4 - Prob. 6PSCh. 2.4 - Prob. 7PSCh. 2.4 - Prob. 8PSCh. 2.4 - Prob. 9PSCh. 2.4 - Prob. 10PSCh. 2.4 - Prob. 11PSCh. 2.4 - Prob. 12PSCh. 2.4 - Prob. 13PSCh. 2.4 - Prob. 14PSCh. 2.4 - Prob. 15PSCh. 2.4 - Prob. 16PSCh. 2.4 - Prob. 17PSCh. 2.4 - Prob. 18PSCh. 2.4 - Prob. 19PSCh. 2.4 - Prob. 20PSCh. 2.4 - Prob. 21PSCh. 2.4 - Prob. 22PSCh. 2.4 - Prob. 23PSCh. 2.4 - Prob. 24PSCh. 2.4 - Prob. 25PSCh. 2.4 - Prob. 26PSCh. 2.4 - Prob. 27PSCh. 2.4 - Prob. 28PSCh. 2.4 - Prob. 29PSCh. 2.4 - Show that the following sets have the same...Ch. 2.4 - Prob. 31PSCh. 2.4 - Prob. 32PSCh. 2.4 - Prob. 33PSCh. 2.4 - Prob. 34PSCh. 2.4 - Prob. 35PSCh. 2.4 - Prob. 36PSCh. 2.4 - Prob. 37PSCh. 2.4 - Prob. 38PSCh. 2.4 - Prob. 39PSCh. 2.4 - Prob. 40PSCh. 2.4 - Prob. 41PSCh. 2.4 - Prob. 42PSCh. 2.4 - Prob. 43PSCh. 2.4 - Prob. 44PSCh. 2.4 - Prob. 45PSCh. 2.4 - Prob. 46PSCh. 2.4 - Prob. 47PSCh. 2.4 - Prob. 48PSCh. 2.4 - Prob. 49PSCh. 2.4 - Prob. 50PSCh. 2.4 - Prob. 51PSCh. 2.4 - Prob. 52PSCh. 2.4 - Prob. 53PSCh. 2.4 - Prob. 54PSCh. 2.4 - Prob. 55PSCh. 2.4 - Prob. 56PSCh. 2.4 - Prob. 57PSCh. 2.4 - Prob. 58PSCh. 2.4 - Prob. 59PSCh. 2.4 - Prob. 60PSCh. 2.CR - Prob. 1CRCh. 2.CR - Prob. 2CRCh. 2.CR - Prob. 3CRCh. 2.CR - Prob. 4CRCh. 2.CR - Prob. 5CRCh. 2.CR - Prob. 6CRCh. 2.CR - Prob. 7CRCh. 2.CR - Prob. 8CRCh. 2.CR - Prob. 9CRCh. 2.CR - Prob. 10CRCh. 2.CR - Prob. 11CRCh. 2.CR - Prob. 12CRCh. 2.CR - Prob. 13CRCh. 2.CR - Prob. 14CRCh. 2.CR - Prob. 15CRCh. 2.CR - Prob. 16CRCh. 2.CR - Prob. 17CRCh. 2.CR - Human blood is typed Rh+ positive blood or Rh...Ch. 2.CR - Prob. 19CRCh. 2.CR - Prob. 20CR
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