Bundle: Understandable Statistics: Concepts And Methods, 12th + Webassign, Single-term Printed Access Card
12th Edition
ISBN: 9781337605199
Author: Charles Henry Brase, Corrinne Pellillo Brase
Publisher: Brooks Cole
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Textbook Question
Chapter 5.1, Problem 1P
Statistical Literacy Which of the following are continuous variables, and which are discrete?
- (a) Number of traffic fatalities per year in the state of Florida
- (b) Distance a golf ball travels after being hit with a driver
- (c) Time required to drive from home to college on any given day
- (d) Number of ships in Pearl Harbor on any given day
- (e) Your weight before breakfast each morning
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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.)
Chapter 5 Solutions
Bundle: Understandable Statistics: Concepts And Methods, 12th + Webassign, Single-term Printed Access Card
Ch. 5.1 - Statistical Literacy Which of the following are...Ch. 5.1 - Statistical Literacy Which of the following are...Ch. 5.1 - Statistical Literacy Consider each distribution....Ch. 5.1 - Prob. 4PCh. 5.1 - Prob. 5PCh. 5.1 - Statistical Literacy Consider the probability...Ch. 5.1 - Basic Computation: Expected Value and Standard...Ch. 5.1 - Basic Computation: Expected Value For a...Ch. 5.1 - Critical Thinking: Simulation We can use the...Ch. 5.1 - Marketing: Age What is the age distribution of...
Ch. 5.1 - Marketing: Income What is the income distribution...Ch. 5.1 - History: Florence Nightingale What was the age...Ch. 5.1 - Fishing: Trout The following data are based on...Ch. 5.1 - Criminal Justice: Parole USA Today reported that...Ch. 5.1 - Prob. 15PCh. 5.1 - Prob. 16PCh. 5.1 - Expected Value: Life Insurance Jim is a...Ch. 5.1 - Expected Value: Life Insurance Sara is a...Ch. 5.1 - Prob. 19PCh. 5.1 - Prob. 20PCh. 5.1 - Combination of Random Variables: Insurance Risk...Ch. 5.2 - Statistical Literacy What does the random variable...Ch. 5.2 - Prob. 2PCh. 5.2 - Statistical Literacy For a binomial experiment,...Ch. 5.2 - Prob. 4PCh. 5.2 - Interpretation Suppose you are a hospital manager...Ch. 5.2 - Prob. 6PCh. 5.2 - Prob. 7PCh. 5.2 - Prob. 8PCh. 5.2 - Critical Thinking According to the college...Ch. 5.2 - Prob. 10PCh. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - Prob. 17PCh. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - Prob. 22PCh. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - Prob. 26PCh. 5.2 - Binomial Distribution Table: Symmetry Study the...Ch. 5.2 - Prob. 28PCh. 5.2 - Prob. 29PCh. 5.2 - In each of the following problems, the binomial...Ch. 5.2 - Prob. 31PCh. 5.2 - Prob. 32PCh. 5.3 - Statistical Literacy What does the expected value...Ch. 5.3 - Statistical Literacy Consider two binomial...Ch. 5.3 - Basic Computation: Expected Value and Standard...Ch. 5.3 - Basic Computation: Expected Value and Standard...Ch. 5.3 - Critical Thinking Consider a binomial distribution...Ch. 5.3 - Prob. 6PCh. 5.3 - Prob. 7PCh. 5.3 - Prob. 8PCh. 5.3 - Critical Thinking Consider a binomial distribution...Ch. 5.3 - Prob. 10PCh. 5.3 - Sports: Surfing In Hawaii, January is a favorite...Ch. 5.3 - Quality Control: Syringes The quality-control...Ch. 5.3 - Private Investigation: Locating People Old Friends...Ch. 5.3 - Ecology: Hawaiian Tsunamis A tidal wave or tsunami...Ch. 5.3 - Education: Illiteracy USA Today reported that...Ch. 5.3 - Rude Drivers: Tailgating Do you tailgate the car...Ch. 5.3 - Hype: Improved Products The Wall Street Journal...Ch. 5.3 - Prob. 18PCh. 5.3 - Prob. 19PCh. 5.3 - Defense: Radar Stations The probability that a...Ch. 5.3 - Criminal Justice: Jury Duty Have you ever tried to...Ch. 5.3 - Public Safety: 911 Calls The Denver Post reported...Ch. 5.3 - Law Enforcement: Property Crime Does crime pay?...Ch. 5.3 - Prob. 24PCh. 5.3 - Prob. 25PCh. 5.3 - Prob. 26PCh. 5.3 - Prob. 27PCh. 5.3 - Critical Thinking Let r be a binomial random...Ch. 5.4 - Statistical Literacy For a binomial experiment,...Ch. 5.4 - Statistical Literacy When using the Poisson...Ch. 5.4 - Critical Thinking Suppose we have a binomial...Ch. 5.4 - Critical Thinking Suppose we have a binomial...Ch. 5.4 - Prob. 5PCh. 5.4 - Prob. 6PCh. 5.4 - Prob. 7PCh. 5.4 - Prob. 8PCh. 5.4 - College: Core Requirement Susan is taking Western...Ch. 5.4 - Law: Bar Exam Bob is a recent law school graduate...Ch. 5.4 - Sociology: Hawaiians On the leeward side of the...Ch. 5.4 - Prob. 12PCh. 5.4 - Prob. 13PCh. 5.4 - Archaeology: Artifacts At Burnt Mesa Pueblo, in...Ch. 5.4 - Ecology: River Otters In his doctoral thesis, L....Ch. 5.4 - Law Enforcement: Shoplifting The Denver Post...Ch. 5.4 - Prob. 17PCh. 5.4 - Engineering: Cracks Henry Petroski is a professor...Ch. 5.4 - Prob. 19PCh. 5.4 - Earthquakes: San Andreas Fault USA Today reported...Ch. 5.4 - Prob. 21PCh. 5.4 - Prob. 22PCh. 5.4 - Prob. 23PCh. 5.4 - Prob. 24PCh. 5.4 - Prob. 25PCh. 5.4 - Prob. 26PCh. 5.4 - Prob. 27PCh. 5.4 - Prob. 28PCh. 5.4 - Prob. 29PCh. 5.4 - Prob. 30PCh. 5.4 - Prob. 31PCh. 5.4 - Prob. 32PCh. 5.4 - Prob. 33PCh. 5 - Prob. 1CRPCh. 5 - Prob. 2CRPCh. 5 - Prob. 3CRPCh. 5 - Prob. 4CRPCh. 5 - Prob. 5CRPCh. 5 - Prob. 6CRPCh. 5 - Prob. 7CRPCh. 5 - Prob. 8CRPCh. 5 - Prob. 9CRPCh. 5 - Airlines: On-Time Arrivals Consumer Reports rated...Ch. 5 - Prob. 11CRPCh. 5 - Prob. 12CRPCh. 5 - Prob. 13CRPCh. 5 - Prob. 14CRPCh. 5 - Prob. 15CRPCh. 5 - Prob. 16CRPCh. 5 - Prob. 17CRPCh. 5 - Prob. 18CRPCh. 5 - Prob. 19CRPCh. 5 - Prob. 20CRPCh. 5 - Prob. 2DHCh. 5 - Prob. 2LCCh. 5 - Prob. 4LCCh. 5 - Prob. 1UTCh. 5 - Prob. 2UTCh. 5 - Prob. 3UTCh. 5 - Prob. 4UTCh. 5 - Prob. 5UTCh. 5 - Prob. 6UTCh. 5 - Binomial Distributions Although tables of binomial...
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