MyLab Statistics with Pearson eText -- Standalone Access Card -- for Elementary Statistics Using Excel (My Stat Lab)
6th Edition
ISBN: 9780134748849
Author: Mario F. Triola
Publisher: PEARSON
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Chapter 3, Problem 5CRE
To determine
To find: The major flaw in the histogram.
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Problem 3. Pricing a multi-stock option the Margrabe formula
The purpose of this problem is to price a swap option in a 2-stock model, similarly as
what we did in the example in the lectures. We consider a two-dimensional Brownian
motion given by W₁ = (W(¹), W(2)) on a probability space (Q, F,P). Two stock prices
are modeled by the following equations:
dX
=
dY₁ =
X₁ (rdt+
rdt+0₁dW!)
(²)),
Y₁ (rdt+dW+0zdW!"),
with Xo
xo and Yo =yo. This corresponds to the multi-stock model studied in class,
but with notation (X+, Y₁) instead of (S(1), S(2)). Given the model above, the measure
P is already the risk-neutral measure (Both stocks have rate of return r). We write
σ = 0₁+0%. We consider a swap option, which gives you the right, at time T, to
exchange one share of X for one share of Y. That is, the option has payoff
F=(Yr-XT).
(a) We first assume that r = 0 (for questions (a)-(f)). Write an explicit expression for
the process Xt.
Reminder before proceeding to question (b): Girsanov's theorem…
Problem 1. Multi-stock model
We consider a 2-stock model similar to the one studied in class. Namely, we consider
=
S(1)
S(2)
=
S(¹) exp (σ1B(1) + (M1 - 0/1 )
S(²) exp (02B(2) + (H₂-
M2
where (B(¹) ) +20 and (B(2) ) +≥o are two Brownian motions, with
t≥0
Cov (B(¹), B(2)) = p min{t, s}.
"
The purpose of this problem is to prove that there indeed exists a 2-dimensional Brownian
motion (W+)+20 (W(1), W(2))+20 such that
=
S(1)
S(2)
=
=
S(¹) exp (011W(¹) + (μ₁ - 01/1) t)
롱)
S(²) exp (021W (1) + 022W(2) + (112 - 03/01/12) t).
where σ11, 21, 22 are constants to be determined (as functions of σ1, σ2, p).
Hint: The constants will follow the formulas developed in the lectures.
(a) To show existence of (Ŵ+), first write the expression for both W. (¹) and W (2)
functions of (B(1), B(²)).
as
(b) Using the formulas obtained in (a), show that the process (WA) is actually a 2-
dimensional standard Brownian motion (i.e. show that each component is normal,
with mean 0, variance t, and that their…
The scores of 8 students on the midterm exam and final exam were as follows.
Student
Midterm
Final
Anderson
98
89
Bailey
88
74
Cruz
87
97
DeSana
85
79
Erickson
85
94
Francis
83
71
Gray
74
98
Harris
70
91
Find the value of the (Spearman's) rank correlation coefficient test statistic that would be used to test the claim of no correlation between midterm score and final exam score. Round your answer to 3 places after the decimal point, if necessary.
Test statistic: rs =
Chapter 3 Solutions
MyLab Statistics with Pearson eText -- Standalone Access Card -- for Elementary Statistics Using Excel (My Stat Lab)
Ch. 3.1 - 1. Average The defunct website IncomeTaxList.com...Ch. 3.1 - 2. What’s Wrong? USA Today published a list...Ch. 3.1 - Prob. 3BSCCh. 3.1 - Prob. 4BSCCh. 3.1 - Critical Thinking. For Exercises 5-20, watch out...Ch. 3.1 - Critical Thinking. For Exercises 5-20, watch out...Ch. 3.1 - Critical Thinking. For Exercises 5-20, watch out...Ch. 3.1 - Prob. 8BSCCh. 3.1 - Prob. 9BSCCh. 3.1 - Critical Thinking. For Exercises 5-20, watch out...
Ch. 3.1 - Prob. 11BSCCh. 3.1 - Prob. 12BSCCh. 3.1 - Prob. 13BSCCh. 3.1 - Prob. 14BSCCh. 3.1 - Prob. 15BSCCh. 3.1 - Prob. 16BSCCh. 3.1 - Prob. 17BSCCh. 3.1 - Critical Thinking. For Exercises 5-20, watch out...Ch. 3.1 - Prob. 19BSCCh. 3.1 - Prob. 20BSCCh. 3.1 - Prob. 21BSCCh. 3.1 - Prob. 22BSCCh. 3.1 - Prob. 23BSCCh. 3.1 - Prob. 24BSCCh. 3.1 - Prob. 25BSCCh. 3.1 - Prob. 26BSCCh. 3.1 - Prob. 27BSCCh. 3.1 - Prob. 28BSCCh. 3.1 - In Exercises 29-32, find the mean of the data...Ch. 3.1 - Prob. 30BSCCh. 3.1 - Prob. 31BSCCh. 3.1 - Prob. 32BSCCh. 3.1 - Prob. 33BSCCh. 3.1 - Prob. 34BSCCh. 3.1 - Prob. 35BBCh. 3.1 - Prob. 36BBCh. 3.1 - Prob. 37BBCh. 3.1 - Prob. 38BBCh. 3.1 - Prob. 39BBCh. 3.1 - Prob. 40BBCh. 3.1 - Prob. 41BBCh. 3.2 - 1. Range Rule of Thumb for Estimating s The 20...Ch. 3.2 - Prob. 2BSCCh. 3.2 - Prob. 3BSCCh. 3.2 - Prob. 4BSCCh. 3.2 - In Exercises 5-20, find the range, variance, and...Ch. 3.2 - In Exercises 5-20, find the range, variance, and...Ch. 3.2 - Prob. 7BSCCh. 3.2 - Prob. 8BSCCh. 3.2 - Prob. 9BSCCh. 3.2 - Prob. 10BSCCh. 3.2 - Prob. 11BSCCh. 3.2 - Prob. 12BSCCh. 3.2 - Prob. 13BSCCh. 3.2 - Prob. 14BSCCh. 3.2 - Prob. 15BSCCh. 3.2 - In Exercises 5-20, find the range, variance, and...Ch. 3.2 - Prob. 17BSCCh. 3.2 - Prob. 18BSCCh. 3.2 - Prob. 19BSCCh. 3.2 - Prob. 20BSCCh. 3.2 - Prob. 21BSCCh. 3.2 - Prob. 22BSCCh. 3.2 - Prob. 23BSCCh. 3.2 - In Exercises 21-24, find the coefficient of...Ch. 3.2 - Prob. 25BSCCh. 3.2 - Large Data Sets from Appendix B. In Exercises 25 –...Ch. 3.2 - Prob. 27BSCCh. 3.2 - Prob. 28BSCCh. 3.2 - Prob. 29BSCCh. 3.2 - Prob. 30BSCCh. 3.2 - Prob. 31BSCCh. 3.2 - Estimating Standard Deviation with the Range Rule...Ch. 3.2 - Prob. 33BSCCh. 3.2 - Prob. 34BSCCh. 3.2 - Prob. 35BSCCh. 3.2 - Prob. 36BSCCh. 3.2 - Prob. 37BSCCh. 3.2 - Prob. 38BSCCh. 3.2 - Prob. 39BSCCh. 3.2 - Prob. 40BSCCh. 3.2 - Prob. 41BSCCh. 3.2 - Prob. 42BSCCh. 3.2 - Prob. 43BSCCh. 3.2 - Prob. 44BSCCh. 3.2 - Prob. 45BBCh. 3.2 - Prob. 46BBCh. 3.3 - 1. z Scores LeBron James, one of the most...Ch. 3.3 - Prob. 2BSCCh. 3.3 - Prob. 3BSCCh. 3.3 - 4. z Scores If your score on your next statistics...Ch. 3.3 - z Scores. In Exercises 5-8, express all z scores...Ch. 3.3 - Prob. 6BSCCh. 3.3 - z Scores. In Exercises 5-8, express all z scores...Ch. 3.3 - z Scores. In Exercises 5-8, express all z scores...Ch. 3.3 - Prob. 9BSCCh. 3.3 - Prob. 10BSCCh. 3.3 - Prob. 11BSCCh. 3.3 - Significant Values. In Exercises 9-12, consider a...Ch. 3.3 - Comparing Values. In Exercises 13-16, use z scores...Ch. 3.3 - Prob. 14BSCCh. 3.3 - Prob. 15BSCCh. 3.3 - Prob. 16BSCCh. 3.3 - Prob. 17BSCCh. 3.3 - Prob. 18BSCCh. 3.3 - Prob. 19BSCCh. 3.3 - Prob. 20BSCCh. 3.3 - Prob. 21BSCCh. 3.3 - Prob. 22BSCCh. 3.3 - Percentiles. In Exercises 17-20, use the following...Ch. 3.3 - Prob. 24BSCCh. 3.3 - Prob. 25BSCCh. 3.3 - Prob. 26BSCCh. 3.3 - Prob. 27BSCCh. 3.3 - Prob. 28BSCCh. 3.3 - Prob. 29BSCCh. 3.3 - Prob. 30BSCCh. 3.3 - Prob. 31BSCCh. 3.3 - Prob. 32BSCCh. 3.3 - Prob. 33BSCCh. 3.3 - Prob. 34BSCCh. 3.3 - Prob. 35BSCCh. 3.3 - Prob. 36BSCCh. 3.3 - Prob. 37BBCh. 3 - Prob. 1CQQCh. 3 - 2. Sleep Median What is the median of the sample...Ch. 3 - Prob. 3CQQCh. 3 - Prob. 4CQQCh. 3 - Prob. 5CQQCh. 3 - Prob. 6CQQCh. 3 - Prob. 7CQQCh. 3 - Prob. 8CQQCh. 3 - Prob. 9CQQCh. 3 - Prob. 10CQQCh. 3 - Prob. 1RECh. 3 - Prob. 2RECh. 3 - Prob. 3RECh. 3 - Prob. 4RECh. 3 - Prob. 5RECh. 3 - Prob. 6RECh. 3 - Prob. 7RECh. 3 - Prob. 8RECh. 3 - Prob. 1CRECh. 3 - Prob. 2CRECh. 3 - Prob. 3CRECh. 3 - Prob. 4CRECh. 3 - Prob. 5CRECh. 3 - 6. Normal Distribution Examine the distribution...Ch. 3 - Prob. 1EPCh. 3 - FROM DATA TO DECISION
Second-Hand Smoke
Data Set...
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