Mathematical Statistics with Applications
7th Edition
ISBN: 9780495110811
Author: Dennis Wackerly, William Mendenhall, Richard L. Scheaffer
Publisher: Cengage Learning
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Chapter 7.2, Problem 18E
Applet Exercise Refer to Example 7.5. If σ2 = 1 and n = 10, use the applet Chi-Square Probabilities and Quantiles to find P(S2 ≥ 3). (Recall that, under the conditions previously given. 9S2 has a χ2 distribution with 9 df.)
7.5 In Example 7.2, the ounces of fill from the bottling machine are assumed to have a
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Problem 3. Pricing a multi-stock option the Margrabe formula
The purpose of this problem is to price a swap option in a 2-stock model, similarly as
what we did in the example in the lectures. We consider a two-dimensional Brownian
motion given by W₁ = (W(¹), W(2)) on a probability space (Q, F,P). Two stock prices
are modeled by the following equations:
dX
=
dY₁ =
X₁ (rdt+
rdt+0₁dW!)
(²)),
Y₁ (rdt+dW+0zdW!"),
with Xo
xo and Yo =yo. This corresponds to the multi-stock model studied in class,
but with notation (X+, Y₁) instead of (S(1), S(2)). Given the model above, the measure
P is already the risk-neutral measure (Both stocks have rate of return r). We write
σ = 0₁+0%. We consider a swap option, which gives you the right, at time T, to
exchange one share of X for one share of Y. That is, the option has payoff
F=(Yr-XT).
(a) We first assume that r = 0 (for questions (a)-(f)). Write an explicit expression for
the process Xt.
Reminder before proceeding to question (b): Girsanov's theorem…
Problem 1. Multi-stock model
We consider a 2-stock model similar to the one studied in class. Namely, we consider
=
S(1)
S(2)
=
S(¹) exp (σ1B(1) + (M1 - 0/1 )
S(²) exp (02B(2) + (H₂-
M2
where (B(¹) ) +20 and (B(2) ) +≥o are two Brownian motions, with
t≥0
Cov (B(¹), B(2)) = p min{t, s}.
"
The purpose of this problem is to prove that there indeed exists a 2-dimensional Brownian
motion (W+)+20 (W(1), W(2))+20 such that
=
S(1)
S(2)
=
=
S(¹) exp (011W(¹) + (μ₁ - 01/1) t)
롱)
S(²) exp (021W (1) + 022W(2) + (112 - 03/01/12) t).
where σ11, 21, 22 are constants to be determined (as functions of σ1, σ2, p).
Hint: The constants will follow the formulas developed in the lectures.
(a) To show existence of (Ŵ+), first write the expression for both W. (¹) and W (2)
functions of (B(1), B(²)).
as
(b) Using the formulas obtained in (a), show that the process (WA) is actually a 2-
dimensional standard Brownian motion (i.e. show that each component is normal,
with mean 0, variance t, and that their…
The scores of 8 students on the midterm exam and final exam were as follows.
Student
Midterm
Final
Anderson
98
89
Bailey
88
74
Cruz
87
97
DeSana
85
79
Erickson
85
94
Francis
83
71
Gray
74
98
Harris
70
91
Find the value of the (Spearman's) rank correlation coefficient test statistic that would be used to test the claim of no correlation between midterm score and final exam score. Round your answer to 3 places after the decimal point, if necessary.
Test statistic: rs =
Chapter 7 Solutions
Mathematical Statistics with Applications
Ch. 7.2 - Refer to Example 7.2. The amount of fill dispensed...Ch. 7.2 - Refer to Exercise 7.9. Assume now that the amount...Ch. 7.2 - A forester studying the effects of fertilization...Ch. 7.2 - Suppose the forester in Exercise 7.11 would like...Ch. 7.2 - The Environmental Protection Agency is concerned...Ch. 7.2 - If in Exercise 7.13 we want the sample mean to...Ch. 7.2 - Suppose that X1, X2,Xm and Y1, Y2,Yn are...Ch. 7.2 - Referring to Exercise 7.13, suppose that the...Ch. 7.2 - Applet Exercise Refer to Example 7.4. Use the...Ch. 7.2 - Applet Exercise Refer to Example 7.5. If 2 = 1 and...
Ch. 7.2 - Ammeters produced by a manufacturer are marketed...Ch. 7.2 - a If U has a 2 distribution with v df, find E(U)...Ch. 7.2 - Refer to Exercise 7.13. Suppose that n = 20...Ch. 7.2 - Prob. 22ECh. 7.2 - Applet Exercise a Use the applet Chi-Square...Ch. 7.2 - Applet Exercise Refer to Example 7.6. Suppose that...Ch. 7.2 - Applet Exercise Suppose that T is a t-distributed...Ch. 7.2 - Refer to Exercise 7.11. Suppose that in the forest...Ch. 7.2 - Applet Exercise Refer to Example 7.7. If we take...Ch. 7.2 - Applet Exercise Suppose that Y has an F...Ch. 7.2 - If Y is a random variable that has an F...Ch. 7.2 - Suppose that Z has a standard normal distribution...Ch. 7.2 - a Use Table 7, Appendix 3, to find F.01 for...Ch. 7.2 - Applet Exercise a Find t.05 for a t-distributed...Ch. 7.2 - Prob. 33ECh. 7.2 - Suppose that W1 and W2 are independent...Ch. 7.2 - Prob. 35ECh. 7.2 - Let S12 denote the sample variance for a random...Ch. 7.2 - Let Y1, Y2,,Y5 be a random sample of size 5 from a...Ch. 7.2 - Suppose that Y1, Y2,,Y5, Y6, Y,W, and U are as...Ch. 7.2 - Prob. 39ECh. 7.3 - The fracture strength of tempered glass averages...Ch. 7.3 - An anthropologist wishes to estimate the average...Ch. 7.3 - Suppose that the anthropologist of Exercise 7.43...Ch. 7.3 - Workers employed in a large service industry have...Ch. 7.3 - The acidity of soils is measured by a quantity...Ch. 7.3 - Prob. 47ECh. 7.3 - Prob. 48ECh. 7.3 - The length of time required for the periodic...Ch. 7.3 - Shear strength measurements for spot welds have...Ch. 7.3 - Refer to Exercise 7.50. If the standard deviation...Ch. 7.3 - Resistors to be used in a circuit have average...Ch. 7.3 - One-hour carbon monoxide concentrations in air...Ch. 7.3 - Unaltered bitumens, as commonly found in leadzinc...Ch. 7.3 - The downtime per day for a computing facility has...Ch. 7.3 - Prob. 56ECh. 7.3 - Twenty-five heat lamps are connected in a...Ch. 7.3 - Prob. 58ECh. 7.3 - Prob. 59ECh. 7.3 - Prob. 60ECh. 7.3 - Refer to Exercise 7.60. Suppose that n1 = n2 = n,...Ch. 7.3 - Prob. 62ECh. 7.3 - Refer to Exercise 7.62. Find the number of...Ch. 7.5 - Applet Exercise Suppose that Y has a binomial...Ch. 7.5 - Prob. 66ECh. 7.5 - Prob. 67ECh. 7.5 - Prob. 70ECh. 7.5 - Prob. 71ECh. 7.5 - A machine is shut down for repairs if a random...Ch. 7.5 - An airline finds that 5% of the persons who make...Ch. 7.5 - According to a survey conducted by the American...Ch. 7.5 - A pollster believes that 20% of the voters in a...Ch. 7.5 - a Show that the variance of Y/n, where Y has a...Ch. 7.5 - The manager of a supermarket wants to obtain...Ch. 7.5 - If the supermarket manager (Exercise 7.77) samples...Ch. 7.5 - Suppose that a random sample of 25 items is...Ch. 7.5 - Prob. 80ECh. 7.5 - Prob. 81ECh. 7.5 - Prob. 82ECh. 7.5 - Prob. 84ECh. 7.5 - Prob. 85ECh. 7.5 - Prob. 86ECh. 7.5 - Prob. 87ECh. 7 - The efficiency (in lumens per watt) of light bulbs...Ch. 7 - Refer to Exercise 7.88. What should be the mean...Ch. 7 - Prob. 90SECh. 7 - A retail dealer sells three brands of automobiles....Ch. 7 - From each of two normal populations with identical...Ch. 7 - Prob. 93SECh. 7 - Prob. 94SECh. 7 - The coefficient of variation (CV) for a sample of...Ch. 7 - Prob. 96SECh. 7 - Prob. 97SECh. 7 - Prob. 100SECh. 7 - Prob. 101SECh. 7 - Prob. 102SECh. 7 - Prob. 103SECh. 7 - Prob. 104SECh. 7 - If the probability that a person will suffer an...
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