Contemporary Mathematics for Business & Consumers
8th Edition
ISBN: 9781305585447
Author: Robert Brechner, Geroge Bergeman
Publisher: Cengage Learning
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Chapter 2.I, Problem 10RE
To determine
To calculate: The mixed form or whole number form of the improper fraction
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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
Contemporary Mathematics for Business & Consumers
Ch. 2.I - For each of the following, identify the type of...Ch. 2.I - Prob. 2TIECh. 2.I - Convert the following mixed numbers to improper...Ch. 2.I - Prob. 4TIECh. 2.I - Prob. 5TIECh. 2.I - Prob. 6TIECh. 2.I - Prob. 1RECh. 2.I - Prob. 2RECh. 2.I - Prob. 3RECh. 2.I - Prob. 4RE
Ch. 2.I - Prob. 5RECh. 2.I - Prob. 6RECh. 2.I - Prob. 7RECh. 2.I - Prob. 8RECh. 2.I - Prob. 9RECh. 2.I - Prob. 10RECh. 2.I - Prob. 11RECh. 2.I - Prob. 12RECh. 2.I - Prob. 13RECh. 2.I - Prob. 14RECh. 2.I - Prob. 15RECh. 2.I - Prob. 16RECh. 2.I - Prob. 17RECh. 2.I - Use inspection or the greatest common divisor to...Ch. 2.I - Use inspection or the greatest common divisor to...Ch. 2.I - Prob. 20RECh. 2.I - Prob. 21RECh. 2.I - Prob. 22RECh. 2.I - Prob. 23RECh. 2.I - Use inspection or the greatest common divisor to...Ch. 2.I - Use inspection or the greatest common divisor to...Ch. 2.I - Prob. 26RECh. 2.I - Prob. 27RECh. 2.I - Prob. 28RECh. 2.I - Prob. 29RECh. 2.I - Raise the following fractions to higher terms as...Ch. 2.I - Prob. 31RECh. 2.I - Raise the following fractions to higher terms as...Ch. 2.I - Prob. 33RECh. 2.I - Prob. 34RECh. 2.I - Prob. 35RECh. 2.I - Prob. 36RECh. 2.I - Prob. 37RECh. 2.I - Raise the following fractions to higher terms as...Ch. 2.I - Raise the following fractions to higher terms as...Ch. 2.I - SECTION I – UNDERSTANDING AND WORKING WITH...Ch. 2.I - Prob. 41RECh. 2.I - Section I • Understanding and working with...Ch. 2.I - Section I Understanding and working with...Ch. 2.I - Section I • Understanding and working with...Ch. 2.II - Determine the least common denominator of the...Ch. 2.II - Prob. 8TIECh. 2.II - Prob. 9TIECh. 2.II - Prob. 10TIECh. 2.II - Prob. 11TIECh. 2.II - Prob. 12TIECh. 2.II - Prob. 13TIECh. 2.II - Prob. 1RECh. 2.II - Prob. 2RECh. 2.II - Prob. 3RECh. 2.II - Prob. 4RECh. 2.II - Prob. 5RECh. 2.II - Prob. 6RECh. 2.II - Prob. 7RECh. 2.II - Prob. 8RECh. 2.II - Prob. 9RECh. 2.II - Prob. 10RECh. 2.II - Prob. 11RECh. 2.II - Prob. 12RECh. 2.II - Prob. 13RECh. 2.II - Prob. 14RECh. 2.II - Prob. 15RECh. 2.II - Prob. 16RECh. 2.II - Prob. 17RECh. 2.II - Crate and Barrel shipped three packages to New...Ch. 2.II - Prob. 19RECh. 2.II - BrewMasters Coffee Co. purchased 1212 tons of...Ch. 2.II - Prob. 21RECh. 2.II - Prob. 22RECh. 2.II - Prob. 23RECh. 2.II - Subtract the following fractions and reduce to...Ch. 2.II - Prob. 25RECh. 2.II - Prob. 26RECh. 2.II - Prob. 27RECh. 2.II - Prob. 28RECh. 2.II - Prob. 29RECh. 2.II - A particular dress requires 314 yards of fabric...Ch. 2.II - 31. Robert Burkart bought a frozen,...Ch. 2.II - 32. Brady White weighed pounds when he decided to...Ch. 2.II - Prob. 33RECh. 2.II - Tim Kenney, a painter, used 645 gallons of paint...Ch. 2.II - You are an executive with the Varsity Corporation...Ch. 2.III - Multiply and reduce to lowest terms.
Ch. 2.III - Multiply and reduce to lowest terms.
a. b.
Ch. 2.III - Divide the following fractions and mixed...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - Multiply the following fractions and reduce to...Ch. 2.III - 13. A recent market research survey showed that ...Ch. 2.III - 14. Wendy Wilson planned to bake a triple recipe...Ch. 2.III - A driveway requires 912 truckloads of gravel. If...Ch. 2.III - Melissa Silva borrowed $4,200 from the bank. If...Ch. 2.III - Amy Richards movie collection occupies 58 of her...Ch. 2.III - Three partners share a business. Max owns 38,...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Divide the following fractions and reduce to...Ch. 2.III - Frontier Homes, Inc., a builder of custom homes,...Ch. 2.III - An automobile travels 365 miles on 1623 gallons of...Ch. 2.III - 33. Pier 1 Imports purchased 600 straw baskets...Ch. 2.III - 34. At the Cattleman’s Market, pounds of...Ch. 2.III - 35. Super Value Hardware Supply buys nails in bulk...Ch. 2.III - The chef at the Sizzling Steakhouse has 140 pounds...Ch. 2.III - Regal Reflective Signs makes speed limit signs for...Ch. 2.III - 38. Engineers at Triangle Electronics use special...Ch. 2.III - 39. At Celtex Manufacturing, a chemical etching...Ch. 2.III - 40. You are the owner of The Gourmet Diner. On...Ch. 2 - 1. In fractions, the number above the division...Ch. 2 - 2. The numerator of a proper fraction is...Ch. 2 - To convert an improper fraction to a whole or...Ch. 2 - 4. To convert a mixed number to an improper...Ch. 2 - Prob. 5CRCh. 2 - Prob. 6CRCh. 2 - Prob. 7CRCh. 2 - Prob. 8CRCh. 2 - Prob. 9CRCh. 2 - Prob. 10CRCh. 2 - Prob. 11CRCh. 2 - Prob. 12CRCh. 2 - Prob. 13CRCh. 2 - Prob. 14CRCh. 2 - Identify the type of fraction and write it in word...Ch. 2 - Prob. 2ATCh. 2 - Prob. 3ATCh. 2 - Prob. 4ATCh. 2 - Prob. 5ATCh. 2 - Prob. 6ATCh. 2 - Prob. 7ATCh. 2 - Prob. 8ATCh. 2 - Prob. 9ATCh. 2 - Convert to higher terms as indicated.
10. to...Ch. 2 - Prob. 11ATCh. 2 - Prob. 12ATCh. 2 - Prob. 13ATCh. 2 - Prob. 14ATCh. 2 - Prob. 15ATCh. 2 - Prob. 16ATCh. 2 - Prob. 17ATCh. 2 - Prob. 18ATCh. 2 - Prob. 19ATCh. 2 - Prob. 20ATCh. 2 - 21. The Bean Counters, an accounting firm, has 161...Ch. 2 - Ventura Coal mined 623 tons on Monday, 734 tons on...Ch. 2 - 23. A blueprint of a house has a scale of 1 inch...Ch. 2 - If 38 of a 60-pound bag of ready-mix concrete is...Ch. 2 - Prob. 25ATCh. 2 - 26. During a spring clearance sale, Sears...Ch. 2 - You are a sales representative for Boaters...Ch. 2 - 28. A developer owns three lots measuring acres...Ch. 2 - 29. A house has 4,400 square feet. The bedrooms...Ch. 2 - 30. Among other ingredients, a recipe for linguini...Ch. 2 - You are an engineer with Ace Foundations, Inc....
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