Introductory Combinatorics
5th Edition
ISBN: 9780136020400
Author: Richard A. Brualdi
Publisher: Prentice Hall
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Chapter 7, Problem 4E
To determine
To prove: The Fibonacci sequence is the solution of the recurrence relation, where
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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
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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
Introductory Combinatorics
Ch. 7 - Prob. 1ECh. 7 - Prove that the nth Fibonacci number fn is the...Ch. 7 - Prove the following about the Fibonacci...Ch. 7 - 4. Prove that the Fibonacci sequence is the...Ch. 7 - By examining the Fibonacci sequence, make a...Ch. 7 - * Let m and n be positive integers. Prove that if...Ch. 7 - * Let m and n be positive integers whose greatest...Ch. 7 - Consider a 1-by-n chessboard. Suppose we color...Ch. 7 - Prob. 9ECh. 7 - Prob. 10E
Ch. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - 13. Determine the generating function for each of...Ch. 7 - 14. Let S be the multiset {∞ · e1, ∞ · e2, ∞ · e3,...Ch. 7 - 15. Determine the generating function for the...Ch. 7 - 16. Formulate a combinatorial problem for which...Ch. 7 - 17. Determine the generating function for the...Ch. 7 - 18. Determine the generating function for the...Ch. 7 - 19. Let h0, h1, h2, …, hn, … be the sequence...Ch. 7 - Prob. 20ECh. 7 - 21. * Let hn denote the number of regions into...Ch. 7 - 22. Determine the exponential generating function...Ch. 7 - 23. Let α be a real number. Let the sequence h0,...Ch. 7 - 24. Let S be the multiset {∞ · e1, ∞ · e2, · , ∞ ·...Ch. 7 - 25. Let hn denote the number of ways to color the...Ch. 7 - Determine the number of ways to color the squares...Ch. 7 - Determine the number of n-digit numbers with all...Ch. 7 - Determine the number of n-digit numbers with all...Ch. 7 - We have used exponential generating functions to...Ch. 7 - Prob. 30ECh. 7 - Solve the recurrence relation hn = 4hn−2, (n ≥ 2)...Ch. 7 - Prob. 32ECh. 7 - Solve the recurrence relation hn = hn−1 + 9hn−2 −...Ch. 7 - Solve the recurrence relation hn = 8hn−1 − 16hn−2,...Ch. 7 - Solve the recurrence relation hn = 3hn − 2 − 2hn −...Ch. 7 - Prob. 36ECh. 7 - Determine a recurrence relation for the number an...Ch. 7 - Prob. 38ECh. 7 - Let hn denote the number of ways to perfectly...Ch. 7 - Let an equal the number of ternary strings of...Ch. 7 - * Let 2n equally spaced points be chosen on a...Ch. 7 - Solve the nonhomogeneous recurrence relation
Ch. 7 - Solve the nonhomogeneous recurrence relation
hn =...Ch. 7 - Solve the nonhomogeneous recurrence relation
Ch. 7 - Prob. 45ECh. 7 - Solve the nonhomogeneous recurrence relation
Ch. 7 - Solve the nonhomogeneous recurrence relation
Ch. 7 - Solve the following recurrence relations by using...Ch. 7 - (q-binomial theorem) Prove that
where
is the...Ch. 7 - Call a subset S of the integers {1, 2, …, n}...Ch. 7 - Solve the recurrence relation
from Section 7.6...Ch. 7 - Prob. 52ECh. 7 - Suppose you deposit $500 in a bank account that...
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