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 31E
- a Use Table 7, Appendix 3, to find F.01 for F-distributed random variables, all with 4 numerator degrees of freedom, but with denominator degrees of freedom of 10, 15, 30, 60, 120, and ∞.
- b Refer to part (a). What do you observe about the values of F.01 as the number of denominator degrees of freedom increases?
- c What is
- d Divide the value of
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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
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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