Statistics: The Art and Science of Learning From Data, Books a la Carte Edition (4th Edition)
4th Edition
ISBN: 9780133860825
Author: Alan Agresti, Christine A. Franklin, Bernhard Klingenberg
Publisher: PEARSON
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Chapter 7, Problem 43CP
a.
To determine
Find the
b.
To determine
Find the probability of falsely indicating a problem when using 2 standard deviations.
c.
To determine
Find the probability that next nine sample means will all fall above the mean.
Find the probability that next nine sample means will all fall above or all fall below the mean.
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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 7 Solutions
Statistics: The Art and Science of Learning From Data, Books a la Carte Edition (4th Edition)
Ch. 7.1 - Simulating the exit poll Simulate an exit poll of...Ch. 7.1 - Simulate condo solicitations A company that is...Ch. 7.1 - Condo sample distribution Consider the sampling...Ch. 7.1 - iPhone apps Let p = 0.25 be the proportion of...Ch. 7.1 - Other scenario for exit poll Refer to Examples 1...Ch. 7.1 - Prob. 6PBCh. 7.1 - Random variability in baseball A baseball player...Ch. 7.1 - Relative frequency of heads Construct the sampling...Ch. 7.1 - Prob. 9PBCh. 7.1 - Effect of n on sample proportion The figure...
Ch. 7.1 - Syracuse full-time students Youd like to estimate...Ch. 7.1 - Gender distributions At a university, 60% of the...Ch. 7.1 - Prob. 13PBCh. 7.1 - Prob. 14PBCh. 7.2 - Simulate taking midterms Assume that the...Ch. 7.2 - Education of the self-employed According to a...Ch. 7.2 - Rolling one die Let X denote the outcome of...Ch. 7.2 - Playing roulette A roulette wheel in Las Vegas has...Ch. 7.2 - Simulate rolling dice Access the Sampling...Ch. 7.2 - Prob. 20PBCh. 7.2 - Shared family phone plan A recent personalized...Ch. 7.2 - Dropped from plan previous exercise mentions that...Ch. 7.2 - Restaurant profit? Jans All You Can Eat Restaurant...Ch. 7.2 - Survey accuracy A study investigating the...Ch. 7.2 - Blood pressure Vincenzo Baranello was diagnosed...Ch. 7.2 - Household size According to the 2010 U.S. census...Ch. 7.2 - Average monthly sales A large corporation employs...Ch. 7.2 - Prob. 28PBCh. 7.2 - CLT for skewed population Access the Sampling...Ch. 7.2 - Prob. 30PBCh. 7 - Practicing the Basics Exam performance An exam...Ch. 7 - Blue eyes According to a Boston Globe story, only...Ch. 7 - Prob. 33CPCh. 7 - Prob. 34CPCh. 7 - Prob. 35CPCh. 7 - Returning shipment Refer to the previous exercise,...Ch. 7 - Prob. 37CPCh. 7 - Home runs Based on data from the 2010 Major League...Ch. 7 - Physicians assistants The 2006 AAPA survey of the...Ch. 7 - Bank machine withdrawals An executive in an...Ch. 7 - PDI The scores on the Psychomotor Development...Ch. 7 - Number of sex partners According to recent General...Ch. 7 - Prob. 43CPCh. 7 - Too little or too much cola? Refer to the previous...Ch. 7 - Prob. 45CPCh. 7 - Prob. 46CPCh. 7 - Prob. 47CPCh. 7 - Purpose of sampling distribution Youd like to...Ch. 7 - Prob. 49CPCh. 7 - Prob. 50CPCh. 7 - Prob. 51CPCh. 7 - Prob. 52CPCh. 7 - Prob. 53CPCh. 7 - Winning at roulette Part b of Example 7 used the...Ch. 7 - True or false As the sample size increases, the...Ch. 7 - Prob. 56CPCh. 7 - Prob. 57CPCh. 7 - Prob. 58CPCh. 7 - Prob. 59CPCh. 7 - Prob. 60CPCh. 7 - Prob. 61CPCh. 7 - Prob. 62CPCh. 7 - Prob. 63CP
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