Fundamentals of Differential Equations and Boundary Value Problems
7th Edition
ISBN: 9780321977106
Author: Nagle, R. Kent
Publisher: Pearson Education, Limited
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Chapter 5.8, Problem 2E
To determine
To find:
The points of Poincare map, graph them with the given values for the equation, and describe the limit set for the system.
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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?
Chapter 5 Solutions
Fundamentals of Differential Equations and Boundary Value Problems
Ch. 5.2 - Let A=D1, B=D+2, C=D2+D2, where D=d/dt. For y=t38,...Ch. 5.2 - Show that the operator (D1)(D+2) is the same as...Ch. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - In Problems 3-18, use the elimination method to...
Ch. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - Prob. 14ECh. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - Prob. 16ECh. 5.2 - Prob. 17ECh. 5.2 - In Problems 3-18, use the elimination method to...Ch. 5.2 - In Problems 19-21, solve the given initial value...Ch. 5.2 - In Problems 19-21, solve the given initial value...Ch. 5.2 - Prob. 21ECh. 5.2 - Prob. 22ECh. 5.2 - Prob. 23ECh. 5.2 - Prob. 24ECh. 5.2 - In Problems 25-28, use the elimination method to...Ch. 5.2 - Prob. 26ECh. 5.2 - Prob. 27ECh. 5.2 - Prob. 28ECh. 5.2 - Prob. 29ECh. 5.2 - Prob. 30ECh. 5.2 - Two large tanks, each holding 100L of liquid, are...Ch. 5.2 - In Problem 31, 3L/min of liquid flowed from tank A...Ch. 5.2 - In Problem 31, assume that no solution flows out...Ch. 5.2 - Feedback System with Pooling Delay. Many physical...Ch. 5.2 - Arms Race. A simplified mathematical model for an...Ch. 5.2 - Let A, B, and C represent three linear...Ch. 5.3 - In Problems 1-7, convert the given initial value...Ch. 5.3 - In Problems 1-7, convert the given initial value...Ch. 5.3 - In Problems 1-7, convert the given initial value...Ch. 5.3 - In Problems 1-7, convert the given initial value...Ch. 5.3 - In Problems 1-7, convert the given initial value...Ch. 5.3 - In Problems 1-7, convert the given initial value...Ch. 5.3 - In Problems 1-7, convert the given initial value...Ch. 5.3 - Prob. 8ECh. 5.3 - In Section 3.6, we discussed the improved Eulers...Ch. 5.3 - In Problems 10-13, use the vectorized Euler method...Ch. 5.3 - In Problems 10-13, use the vectorized Euler method...Ch. 5.3 - In Problems 10-13, use the vectorized Euler method...Ch. 5.3 - In Problems 10-13, use the vectorized Euler method...Ch. 5.3 - Prob. 14ECh. 5.3 - In Problems 14-24, you will need a computer and a...Ch. 5.3 - In Problems 14-24, you will need a computer and a...Ch. 5.3 - Prob. 18ECh. 5.3 - Prob. 19ECh. 5.3 - In Problems 14-24, you will need a computer and a...Ch. 5.3 - Prob. 21ECh. 5.3 - Prob. 22ECh. 5.3 - Prob. 24ECh. 5.3 - Prob. 25ECh. 5.3 - Prob. 26ECh. 5.3 - Prob. 27ECh. 5.3 - Prob. 28ECh. 5.3 - In Problems 25-30, use a software package or the...Ch. 5.3 - Prob. 30ECh. 5.4 - In Problems 1 and 2, verify that the pair x(t),...Ch. 5.4 - In Problems 1 and 2, verify that pair x(t), y(t)...Ch. 5.4 - In Problems 3-6, find the critical point set for...Ch. 5.4 - Prob. 4ECh. 5.4 - In Problems 3-6, find the critical point set for...Ch. 5.4 - In Problems 3-6, find the critical point set for...Ch. 5.4 - In Problems 7-9, solve the related phase plane...Ch. 5.4 - In Problems 7-9, solve the related phase plane...Ch. 5.4 - In Problems 7-9, solve the related phase plane...Ch. 5.4 - Find all the critical points of the system...Ch. 5.4 - In Problems 11-14, solve the related phase plane...Ch. 5.4 - In Problems 11-14, solve the related phase plane...Ch. 5.4 - In Problems 11-14, solve the related phase plane...Ch. 5.4 - In Problems 11-14, solve the related phase plane...Ch. 5.4 - In Problems 15-18, find all critical points for...Ch. 5.4 - In Problems 15-18, find all critical points for...Ch. 5.4 - In Problems 15-18, find all critical points for...Ch. 5.4 - In Problems 15-18, find all critical points for...Ch. 5.4 - In Problems 19-24, convert the given second-order...Ch. 5.4 - In Problems 19-24, convert the given second-order...Ch. 5.4 - Prob. 21ECh. 5.4 - In Problems 19-24, convert the given second-order...Ch. 5.4 - Prob. 23ECh. 5.4 - In Problems 19-24, convert the given second-order...Ch. 5.4 - Prob. 25ECh. 5.4 - Prob. 26ECh. 5.4 - Prob. 27ECh. 5.4 - Prob. 28ECh. 5.4 - A proof of Theorem 1, page 266, is outlined below....Ch. 5.4 - Phase plane analysis provides a quick derivation...Ch. 5.4 - Prob. 32ECh. 5.4 - Prob. 34ECh. 5.4 - Sticky Friction. An alternative for the damping...Ch. 5.4 - Rigid Body Nutation. Eulers equations describe the...Ch. 5.5 - Radioisotopes and Cancer Detection. A radioisotope...Ch. 5.5 - Secretion of Hormones. The secretion of hormones...Ch. 5.5 - Prove that the critical point (8) of the...Ch. 5.5 - Suppose for a certain disease described by the SIR...Ch. 5.5 - Prob. 6ECh. 5.5 - Prob. 7ECh. 5.5 - Prob. 8ECh. 5.5 - Prob. 9ECh. 5.5 - Prove that the infected population I(t) in the SIR...Ch. 5.6 - Two springs and two masses are attached in a...Ch. 5.6 - Determine the equations of motion for the two...Ch. 5.6 - Four springs with the same spring constant and...Ch. 5.6 - Two springs, two masses, and a dashpot are...Ch. 5.6 - Referring to the coupled mass-spring system...Ch. 5.6 - Prob. 7ECh. 5.6 - A double pendulum swinging in a vertical plane...Ch. 5.6 - Prob. 9ECh. 5.6 - Suppose the coupled mass-spring system of Problem...Ch. 5.7 - An RLC series circuit has a voltage source given...Ch. 5.7 - An RLC series circuit has a voltage source given...Ch. 5.7 - Prob. 3ECh. 5.7 - An LC series circuit has a voltage source given by...Ch. 5.7 - An RLC series circuit has a voltage source given...Ch. 5.7 - Show that when the voltage source in (4) is of the...Ch. 5.7 - Prob. 7ECh. 5.7 - Prob. 8ECh. 5.7 - Prob. 9ECh. 5.7 - Prob. 10ECh. 5.7 - In Problems 10-13, find a system of differential...Ch. 5.7 - In Problems 10-13, find a system of differential...Ch. 5.7 - In Problems 10-13, find a system of differential...Ch. 5.8 - A software package that supports the construction...Ch. 5.8 - Prob. 2ECh. 5.8 - A software package that supports the construction...Ch. 5.8 - Prob. 4ECh. 5.8 - Prob. 5ECh. 5.8 - A software package that supports the construction...Ch. 5.8 - Prob. 11ECh. 5.RP - In Problems 1-4, find a general solution x(t),...Ch. 5.RP - In Problems 1-4, find a general solution x(t),...Ch. 5.RP - In Problems 1-4, find a general solution x(t),...Ch. 5.RP - In Problems 1-4, find a general solution x(t),...Ch. 5.RP - Prob. 5RPCh. 5.RP - Prob. 6RPCh. 5.RP - Prob. 7RPCh. 5.RP - Prob. 8RPCh. 5.RP - Prob. 9RPCh. 5.RP - Prob. 10RPCh. 5.RP - Prob. 11RPCh. 5.RP - Prob. 12RPCh. 5.RP - Prob. 13RPCh. 5.RP - Prob. 14RPCh. 5.RP - Prob. 15RPCh. 5.RP - Prob. 16RPCh. 5.RP - Prob. 17RPCh. 5.RP - In the coupled mass-spring system depicted in...
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