Elementary Technical Mathematics
11th Edition
ISBN: 9781285199191
Author: Dale Ewen, C. Robert Nelson
Publisher: Cengage Learning
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Chapter 5.5, Problem 1E
Find each product.
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Calculus lll
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For each month of the year, Taylor collected the average high temperatures in Jackson, Mississippi. He used the data to create the histogram shown. Which set of data did he use to create the histogram?
A
55, 60, 64, 72, 73, 75, 77, 81, 83, 91, 91, 92\ 55,\ 60,\ 64,\ 72,\ 73,\ 75,\ 77,\ 81,\ 83,\ 91,\ 91,\ 92 55, 60, 64, 72, 73, 75, 77, 81, 83, 91, 91, 92
B
55, 57, 60, 65, 70, 71, 78, 79, 85, 86, 88, 91\ 55,\ 57,\ 60,\ 65,\ 70,\ 71,\ 78,\ 79,\ 85,\ 86,\ 88,\ 91 55, 57, 60, 65, 70, 71, 78, 79, 85, 86, 88, 91
C
55, 60, 63, 64, 65, 71, 83, 87, 88, 88, 89, 93\ 55,\ 60,\ 63,\ 64,\ 65,\ 71,\ 83,\ 87,\ 88,\ 88,\ 89,\ 93 55, 60, 63, 64, 65, 71, 83, 87, 88, 88, 89, 93
D
55, 58, 60, 66, 68, 75, 77, 82, 86, 89, 91, 91\ 55,\ 58,\ 60,\ 66,\ 68,\ 75,\ 77,\ 82,\ 86,\ 89,\ 91,\ 91 55, 58, 60, 66, 68, 75, 77, 82, 86, 89, 91, 91
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
Elementary Technical Mathematics
Ch. 5.1 - Prob. 1ECh. 5.1 - Evaluate each expression: (2)(3)2+3(2)6Ch. 5.1 - Prob. 3ECh. 5.1 - Prob. 4ECh. 5.1 - Prob. 5ECh. 5.1 - Prob. 6ECh. 5.1 - Prob. 7ECh. 5.1 - Evaluate each expression: (9)233(6)+[ 3(2)5(3) ]Ch. 5.1 - Evaluate each expression: [ (2)(8)2(2)3 ][ 4+(2)4...Ch. 5.1 - Prob. 10E
Ch. 5.1 - In Exercise 11-16, let x=2 and y=3, and evaluate...Ch. 5.1 - In Exercise 11-16, let x=2 and y=3, and evaluate...Ch. 5.1 - In Exercise 11-16, let x=2 and y=3, and evaluate...Ch. 5.1 - Prob. 14ECh. 5.1 - Prob. 15ECh. 5.1 - In Exercise 11-16, let x=2 and y=3, and evaluate...Ch. 5.1 - In Exercise 17-26, let x=1 and y=5, and evaluate...Ch. 5.1 - In Exercise 17-26, let x=1 and y=5, and evaluate...Ch. 5.1 - In Exercise 17-26, let x=1 and y=5, and evaluate...Ch. 5.1 - In Exercise 17-26, let x=1 and y=5, and evaluate...Ch. 5.1 - In Exercise 17-26, let x=1 and y=5, and evaluate...Ch. 5.1 - In Exercise 17-26, let x=1 and y=5, and evaluate...Ch. 5.1 - In Exercise 17-26, let x=1 and y=5, and evaluate...Ch. 5.1 - Prob. 24ECh. 5.1 - In Exercise 17-26, let x=1 and y=5, and evaluate...Ch. 5.1 - In Exercise 17-26, let x=1 and y=5, and evaluate...Ch. 5.1 - In Exercises 27-32, let x=3,y=4,andz=6 . Evaluate...Ch. 5.1 - In Exercises 27-32, let x=3,y=4,andz=6 . Evaluate...Ch. 5.1 - In Exercises 27-32, let x=3,y=4,andz=6 . Evaluate...Ch. 5.1 - Prob. 30ECh. 5.1 - Prob. 31ECh. 5.1 - Prob. 32ECh. 5.1 - In Exercises 33-42, let x=1,y=2,andz=3 . Evaluate...Ch. 5.1 - Prob. 34ECh. 5.1 - In Exercises 33-42, let x=1,y=2,andz=3 . Evaluate...Ch. 5.1 - Prob. 36ECh. 5.1 - In Exercises 33-42, let x=1,y=2,andz=3 . Evaluate...Ch. 5.1 - In Exercises 33-42, let x=1,y=2,andz=3 . Evaluate...Ch. 5.1 - Prob. 39ECh. 5.1 - In Exercises 33-42, let x=1,y=2,andz=3 . Evaluate...Ch. 5.1 - In Exercises 33-42, let x=1,y=2,andz=3 . Evaluate...Ch. 5.1 - In Exercises 33-42, let x=1,y=2,andz=3 . Evaluate...Ch. 5.2 - Remove the parentheses from each expression:...Ch. 5.2 - Prob. 2ECh. 5.2 - Prob. 3ECh. 5.2 - Prob. 4ECh. 5.2 - Prob. 5ECh. 5.2 - Remove the parentheses from each expression:...Ch. 5.2 - Prob. 7ECh. 5.2 - Prob. 8ECh. 5.2 - Prob. 9ECh. 5.2 - Prob. 10ECh. 5.2 - Prob. 11ECh. 5.2 - Remove the parentheses from each expression:...Ch. 5.2 - Prob. 13ECh. 5.2 - Prob. 14ECh. 5.2 - Prob. 15ECh. 5.2 - Prob. 16ECh. 5.2 - Remove the parentheses from each expression:...Ch. 5.2 - Remove the parentheses from each expression:...Ch. 5.2 - Remove the parentheses from each expression:...Ch. 5.2 - Prob. 20ECh. 5.2 - Prob. 21ECh. 5.2 - Prob. 22ECh. 5.2 - Prob. 23ECh. 5.2 - Prob. 24ECh. 5.2 - Prob. 25ECh. 5.2 - Prob. 26ECh. 5.2 - Prob. 27ECh. 5.2 - Prob. 28ECh. 5.2 - Combine the like terms: 6a2+a+12aCh. 5.2 - Combine the like terms: 5x2+3x28x2Ch. 5.2 - Prob. 31ECh. 5.2 - Prob. 32ECh. 5.2 - Prob. 33ECh. 5.2 - Prob. 34ECh. 5.2 - Prob. 35ECh. 5.2 - Prob. 36ECh. 5.2 - Prob. 37ECh. 5.2 - Combine the like terms: 3x25x2+4x2+x4+5x2x+2Ch. 5.2 - Prob. 39ECh. 5.2 - Prob. 40ECh. 5.2 - Prob. 41ECh. 5.2 - Prob. 42ECh. 5.2 - Prob. 43ECh. 5.2 - Prob. 44ECh. 5.2 - Prob. 45ECh. 5.2 - Prob. 46ECh. 5.2 - Simplify by first removing the parentheses and...Ch. 5.2 - Prob. 48ECh. 5.2 - Prob. 49ECh. 5.2 - Prob. 50ECh. 5.2 - Prob. 51ECh. 5.2 - Prob. 52ECh. 5.2 - Prob. 53ECh. 5.2 - Prob. 54ECh. 5.2 - Prob. 55ECh. 5.2 - Prob. 56ECh. 5.2 - Prob. 57ECh. 5.2 - Prob. 58ECh. 5.2 - Simplify by first removing the parentheses and...Ch. 5.2 - Prob. 60ECh. 5.2 - Prob. 61ECh. 5.2 - Prob. 62ECh. 5.2 - Simplify by first removing the parentheses and...Ch. 5.2 - Prob. 64ECh. 5.2 - Prob. 65ECh. 5.2 - Simplify by first removing the parentheses and...Ch. 5.2 - Prob. 67ECh. 5.2 - Prob. 68ECh. 5.2 - Prob. 69ECh. 5.2 - Prob. 70ECh. 5.2 - Prob. 71ECh. 5.2 - Prob. 72ECh. 5.2 - Simplify by first removing the parentheses and...Ch. 5.2 - Prob. 74ECh. 5.2 - Prob. 75ECh. 5.2 - Prob. 76ECh. 5.2 - Simplify by first removing the parentheses and...Ch. 5.2 - Prob. 78ECh. 5.3 - Classify each expression as a monomial, a...Ch. 5.3 - Prob. 2ECh. 5.3 - Prob. 3ECh. 5.3 - Prob. 4ECh. 5.3 - Prob. 5ECh. 5.3 - Classify each expression as a monomial, a...Ch. 5.3 - Prob. 7ECh. 5.3 - Classify each expression as a monomial, a...Ch. 5.3 - Classify each expression as a monomial, a...Ch. 5.3 - Classify each expression as a monomial, a...Ch. 5.3 - Prob. 11ECh. 5.3 - Prob. 12ECh. 5.3 - Rearrange each polynomial in decreasing order and...Ch. 5.3 - Rearrange each polynomial in decreasing order and...Ch. 5.3 - Prob. 15ECh. 5.3 - Prob. 16ECh. 5.3 - Rearrange each polynomial in decreasing order and...Ch. 5.3 - Rearrange each polynomial in decreasing order and...Ch. 5.3 - Rearrange each polynomial in decreasing order and...Ch. 5.3 - Prob. 20ECh. 5.3 - Prob. 21ECh. 5.3 - Prob. 22ECh. 5.3 - Add the following polynomials: (6x27x+5)+(3x2+2x5)Ch. 5.3 - Prob. 24ECh. 5.3 - Prob. 25ECh. 5.3 - Prob. 26ECh. 5.3 - Prob. 27ECh. 5.3 - Prob. 28ECh. 5.3 - Prob. 29ECh. 5.3 - Prob. 30ECh. 5.3 - Prob. 31ECh. 5.3 - Prob. 32ECh. 5.3 - Prob. 33ECh. 5.3 - Prob. 34ECh. 5.3 - Prob. 35ECh. 5.3 - Prob. 36ECh. 5.3 - Prob. 37ECh. 5.3 - Prob. 38ECh. 5.3 - Find each difference: (3x25x+4)(6x27x+2)Ch. 5.3 - Find each difference: (13x2x2)(15x+x2)Ch. 5.3 - Find each difference: (3a4b)(2a7b)Ch. 5.3 - Prob. 42ECh. 5.3 - Prob. 43ECh. 5.3 - Prob. 44ECh. 5.3 - Prob. 45ECh. 5.3 - Prob. 46ECh. 5.3 - Find each difference: (20w217w6)(13w2+7w)Ch. 5.3 - Find each difference: (y22y+1)(2y2+3y+5)Ch. 5.3 - Prob. 49ECh. 5.3 - Prob. 50ECh. 5.3 - Prob. 51ECh. 5.3 - Prob. 52ECh. 5.3 - Prob. 53ECh. 5.3 - Prob. 54ECh. 5.3 - Prob. 55ECh. 5.3 - Subtract the following polynomials:...Ch. 5.3 - Subtract the following polynomials:...Ch. 5.3 - Prob. 58ECh. 5.4 - Find each product: (3a)(5)Ch. 5.4 - Prob. 2ECh. 5.4 - Prob. 3ECh. 5.4 - Prob. 4ECh. 5.4 - Find each product: (9m2)(6m2)Ch. 5.4 - Prob. 6ECh. 5.4 - Find each product: (8a6)(4a2)Ch. 5.4 - Prob. 8ECh. 5.4 - Prob. 9ECh. 5.4 - Prob. 10ECh. 5.4 - Find each product: (6n)(5n2m)Ch. 5.4 - Find each product: (9ab2)(6a2b3)Ch. 5.4 - Prob. 13ECh. 5.4 - Prob. 14ECh. 5.4 - Prob. 15ECh. 5.4 - Prob. 16ECh. 5.4 - Find each product: (8a2bc)(3ab3c2)Ch. 5.4 - Find each product: (4xy2z3)(4x5z3)Ch. 5.4 - Find each product: (23x2y)(932xy4z3)Ch. 5.4 - Prob. 20ECh. 5.4 - Prob. 21ECh. 5.4 - Prob. 22ECh. 5.4 - Prob. 23ECh. 5.4 - Prob. 24ECh. 5.4 - Prob. 25ECh. 5.4 - Use the rules for exponents to simplify: (xy)4Ch. 5.4 - Prob. 27ECh. 5.4 - Prob. 28ECh. 5.4 - Use the rules for exponents to simplify: (3x4)2Ch. 5.4 - Use the rules for exponents to simplify: (5x2)3Ch. 5.4 - Prob. 31ECh. 5.4 - Prob. 32ECh. 5.4 - Use the rules for exponents to simplify: (x2x3)2Ch. 5.4 - Prob. 34ECh. 5.4 - Prob. 35ECh. 5.4 - Prob. 36ECh. 5.4 - Use the rules for exponents to simplify: (5x3y2)2Ch. 5.4 - Prob. 38ECh. 5.4 - Prob. 39ECh. 5.4 - Prob. 40ECh. 5.4 - Prob. 41ECh. 5.4 - Prob. 42ECh. 5.4 - Prob. 43ECh. 5.4 - Use the rules for exponents to simplify: (16x4x5)3Ch. 5.4 - Use the rules for exponents to simplify: (2x3y4z)3Ch. 5.4 - Prob. 46ECh. 5.4 - Prob. 47ECh. 5.4 - Prob. 48ECh. 5.4 - Prob. 49ECh. 5.4 - Prob. 50ECh. 5.4 - Prob. 51ECh. 5.4 - Prob. 52ECh. 5.4 - Prob. 53ECh. 5.4 - Prob. 54ECh. 5.4 - Prob. 55ECh. 5.4 - Prob. 56ECh. 5.4 - Prob. 57ECh. 5.4 - Prob. 58ECh. 5.4 - Prob. 59ECh. 5.4 - Prob. 60ECh. 5.4 - Prob. 61ECh. 5.4 - Prob. 62ECh. 5.4 - Prob. 63ECh. 5.4 - Prob. 64ECh. 5.4 - Prob. 65ECh. 5.4 - Prob. 66ECh. 5.4 - Prob. 67ECh. 5.4 - Evaluate each expression when a=2andb=3: b4Ch. 5.5 - Find each product. 4(a+6)Ch. 5.5 - Prob. 2ECh. 5.5 - Prob. 3ECh. 5.5 - Prob. 4ECh. 5.5 - Prob. 5ECh. 5.5 - Prob. 6ECh. 5.5 - Prob. 7ECh. 5.5 - Prob. 8ECh. 5.5 - Prob. 9ECh. 5.5 - Prob. 10ECh. 5.5 - Find each product. 3x(4x27x2)Ch. 5.5 - Prob. 12ECh. 5.5 - Prob. 13ECh. 5.5 - Prob. 14ECh. 5.5 - Prob. 15ECh. 5.5 - Prob. 16ECh. 5.5 - Find each product. 6x3(16x2+9x4)Ch. 5.5 - Find each product. 5x4(2x3+8x21)Ch. 5.5 - Prob. 19ECh. 5.5 - Prob. 20ECh. 5.5 - Prob. 21ECh. 5.5 - Prob. 22ECh. 5.5 - Prob. 23ECh. 5.5 - Prob. 24ECh. 5.5 - Prob. 25ECh. 5.5 - Prob. 26ECh. 5.5 - Prob. 27ECh. 5.5 - Prob. 28ECh. 5.5 - Prob. 29ECh. 5.5 - Prob. 30ECh. 5.5 - Prob. 31ECh. 5.5 - Prob. 32ECh. 5.5 - Prob. 33ECh. 5.5 - Prob. 34ECh. 5.5 - Prob. 35ECh. 5.5 - Prob. 36ECh. 5.5 - Find each product. (x+1)(x+6)Ch. 5.5 - Prob. 38ECh. 5.5 - Prob. 39ECh. 5.5 - Prob. 40ECh. 5.5 - Prob. 41ECh. 5.5 - Prob. 42ECh. 5.5 - Prob. 43ECh. 5.5 - Prob. 44ECh. 5.5 - Find each product. (6a+4)(2a3)Ch. 5.5 - Prob. 46ECh. 5.5 - Prob. 47ECh. 5.5 - Prob. 48ECh. 5.5 - Prob. 49ECh. 5.5 - Prob. 50ECh. 5.5 - Prob. 51ECh. 5.5 - Prob. 52ECh. 5.5 - Prob. 53ECh. 5.5 - Prob. 54ECh. 5.5 - Prob. 55ECh. 5.5 - Prob. 56ECh. 5.5 - Prob. 57ECh. 5.5 - Prob. 58ECh. 5.5 - Prob. 59ECh. 5.5 - Prob. 60ECh. 5.5 - Prob. 61ECh. 5.5 - Prob. 62ECh. 5.5 - Find each product. (g+h6)(gh+3)Ch. 5.5 - Find each product. (2x3y+4)(4x5y2)Ch. 5.5 - Find each product. (8xx3+2x41)(x2+2+5x3)Ch. 5.5 - Prob. 66ECh. 5.6 - Divide: 9x53x3Ch. 5.6 - Prob. 2ECh. 5.6 - Divide: 18x1212x4Ch. 5.6 - Prob. 4ECh. 5.6 - Prob. 5ECh. 5.6 - Prob. 6ECh. 5.6 - Divide: 8x212xCh. 5.6 - Prob. 8ECh. 5.6 - Prob. 9ECh. 5.6 - Prob. 10ECh. 5.6 - Prob. 11ECh. 5.6 - Prob. 12ECh. 5.6 - Prob. 13ECh. 5.6 - Prob. 14ECh. 5.6 - Prob. 15ECh. 5.6 - Prob. 16ECh. 5.6 - Divide: 0(113w2r3)Ch. 5.6 - Prob. 18ECh. 5.6 - Prob. 19ECh. 5.6 - Divide: (42x2y3)(14x2y4)Ch. 5.6 - Prob. 21ECh. 5.6 - Prob. 22ECh. 5.6 - Prob. 23ECh. 5.6 - Prob. 24ECh. 5.6 - Divide: 92x3y28xy3Ch. 5.6 - Prob. 26ECh. 5.6 - Prob. 27ECh. 5.6 - Prob. 28ECh. 5.6 - Prob. 29ECh. 5.6 - Prob. 30ECh. 5.6 - Prob. 31ECh. 5.6 - Prob. 32ECh. 5.6 - Prob. 33ECh. 5.6 - Prob. 34ECh. 5.6 - Prob. 35ECh. 5.6 - Prob. 36ECh. 5.6 - Divide: 24a416a28a8Ch. 5.6 - Prob. 38ECh. 5.6 - Prob. 39ECh. 5.6 - Prob. 40ECh. 5.6 - Divide: bx4bx3+bx24bxbxCh. 5.6 - Prob. 42ECh. 5.6 - Prob. 43ECh. 5.6 - Prob. 44ECh. 5.6 - Divide: 224x4y2z3168x3y2z4112xy4z228xy2z2Ch. 5.6 - Prob. 46ECh. 5.6 - Prob. 47ECh. 5.6 - Divide: 3a2b+4a2b26ab22ab2Ch. 5.6 - Prob. 49ECh. 5.6 - Divide: 18w4r4+27w3r336w2r29w3r3Ch. 5.7 - Find each quotient and check: (x2+3x+2)(x+1)Ch. 5.7 - Prob. 2ECh. 5.7 - Prob. 3ECh. 5.7 - Prob. 4ECh. 5.7 - Prob. 5ECh. 5.7 - Prob. 6ECh. 5.7 - Find each quotient and check: 2y2+3y52y1Ch. 5.7 - Prob. 8ECh. 5.7 - Prob. 9ECh. 5.7 - Prob. 10ECh. 5.7 - Prob. 11ECh. 5.7 - Find each quotient and check: (8x318x2+7x+3)(x1)Ch. 5.7 - Find each quotient and check:...Ch. 5.7 - Prob. 14ECh. 5.7 - Find each quotient and check: 2x314x12x+1Ch. 5.7 - Prob. 16ECh. 5.7 - Prob. 17ECh. 5.7 - Prob. 18ECh. 5.7 - Prob. 19ECh. 5.7 - Find each quotient and check: 2x3+3x29x+5x+3Ch. 5.7 - Prob. 21ECh. 5.7 - Prob. 22ECh. 5.7 - Prob. 23ECh. 5.7 - Prob. 24ECh. 5.7 - Find each quotient and check: 8x312x+1Ch. 5.7 - Prob. 26ECh. 5.7 - Prob. 27ECh. 5.7 - Prob. 28ECh. 5.7 - Prob. 29ECh. 5.7 - Find each quotient and check:...Ch. 5 - Prob. 1RCh. 5 - Prob. 2RCh. 5 - For any number a expect 0, a,a1a=?Ch. 5 - Evaluate: 104(3)Ch. 5 - Evaluate: 2+342Ch. 5 - Evaluate: (4)(12)623+1832Ch. 5 - In Exercises 7-12, let x=3andy=2 . Evaluate each...Ch. 5 - In Exercises 7-12, let x=3andy=2 . Evaluate each...Ch. 5 - In Exercises 7-12, let x=3andy=2 . Evaluate each...Ch. 5 - In Exercises 7-12, let x=3andy=2 . Evaluate each...Ch. 5 - In Exercises 7-12, let x=3andy=2 . Evaluate each...Ch. 5 - In Exercises 7-12, let x=3andy=2 . Evaluate each...Ch. 5 - In Exercises 13-16, simplify by removing the...Ch. 5 - In Exercises 13-16, simplify by removing the...Ch. 5 - In Exercises 13-16, simplify by removing the...Ch. 5 - In Exercises 13-16, simplify by removing the...Ch. 5 - Prob. 17RCh. 5 - Prob. 18RCh. 5 - Perform the indicated operation:...Ch. 5 - Perform the indicated operation:...Ch. 5 - Perform the indicated operation:...Ch. 5 - Perform the indicated operation: (6x2)(4x3)Ch. 5 - Perform the indicated operation: (7x2y)(8x3y2)Ch. 5 - Prob. 24RCh. 5 - Perform the indicated operation: 5a(3a+4b)Ch. 5 - Prob. 26RCh. 5 - Perform the indicated operation: (5x+3)(3x4)Ch. 5 - Prob. 28RCh. 5 - Perform the indicated operation: (49x2)(7x3)Ch. 5 - Prob. 30RCh. 5 - Perform the indicated operation: 36a327a2+9a9aCh. 5 - Perform the indicated operation: 6x2+x122x+3Ch. 5 - Perform the indicated operation: 3x3+2x26x+4x+2Ch. 5 - Evaluate: 35242Ch. 5 - Evaluate: 12232+331622Ch. 5 - Prob. 3TCh. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify: Add:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...Ch. 5 - Perform the indicated operation and simplify:...
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- 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…arrow_forwardIn 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.)arrow_forward3. 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.arrow_forward
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- c) Using only Laplace transforms solve the following Samuelson model given below i.e., the second order difference equation (where yt is national income): - Yt+2 6yt+1+5y₁ = 0, if y₁ = 0 for t < 0, and y₁ = 0, y₁ = 1 1-e-s You may use without proof that L-1[s(1-re-s)] = f(t) = r² for n ≤tarrow_forward5. 156 m/WXY = 59° 63 E 7. B E 101 C mFE = 6. 68° 8. C 17arrow_forwardScoring: MATH 15 FILING /10 COMPARISON /10 RULER I 13 Express EMPLOYMENT PROFESSIONALS NAME: SKILLS EVALUATION TEST- Light Industrial MATH-Solve the following problems. (Feel free to use a calculator.) DATE: 1. If you were asked to load 225 boxes onto a truck, and the boxes are crated, with each crate containing nine boxes, how many crates would you need to load? 2. Imagine you live only one mile from work and you decide to walk. If you walk four miles per hour, how long will it take you to walk one mile? 3. Add 3 feet 6 inches + 8 feet 2 inches + 4 inches + 2 feet 5 inches. 4. In a grocery store, steak costs $3.85 per pound. If you buy a three-pound steak and pay for it with a $20 bill, how much change will you get? 5. Add 8 minutes 32 seconds + 37 minutes 18 seconds + 15 seconds. FILING - In the space provided, write the number of the file cabinet where the company should be filed. Example: File Cabinet #4 Elson Co. File Cabinets: 1. Aa-Bb 3. Cg-Dz 5. Ga-Hz 7. La-Md 9. Na-Oz 2. Bc-Cf…arrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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