EBK NATURE OF MATHEMATICS
13th Edition
ISBN: 9781305855588
Author: SMITH
Publisher: CENGAGE CO
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Chapter 7.4, Problem 31PS
To determine
To find:
The unknown measure indicated by a variable x.
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Question 1. Your manager asks you to explain why the Black-Scholes model may be inappro-
priate for pricing options in practice. Give one reason that would substantiate this claim?
Question 2. We consider stock #1 and stock #2 in the model of Problem 2. Your manager
asks you to pick only one of them to invest in based on the model provided. Which one do you
choose and why ?
Question 3. Let (St) to be an asset modeled by the Black-Scholes SDE. Let Ft be the price
at time t of a European put with maturity T and strike price K. Then, the discounted option
price process (ert Ft) t20 is a martingale. True or False? (Explain your answer.)
Question 4. You are considering pricing an American put option using a Black-Scholes model
for the underlying stock. An explicit formula for the price doesn't exist. In just a few words (no
more than 2 sentences), explain how you would proceed to price it.
Question 5. We model a short rate with a Ho-Lee model drt = ln(1+t) dt +2dWt. Then the
interest rate…
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.)
3. Consider the polynomial equation 6-iz+7z² - iz³ +z = 0 for which the roots are 3i, -2i, -i,
and i.
(a) Verify the relations between this roots and the coefficients of the polynomial.
(b) Find the annulus region in which the roots lie.
Chapter 7 Solutions
EBK NATURE OF MATHEMATICS
Ch. 7.1 - Is the woman in the figure a young woman or an old...Ch. 7.1 - Is the fly in the Figure 7.11 on the cube or in...Ch. 7.1 - Prob. 3PSCh. 7.1 - Prob. 4PSCh. 7.1 - Prob. 5PSCh. 7.1 - Prob. 6PSCh. 7.1 - Prob. 7PSCh. 7.1 - Prob. 8PSCh. 7.1 - Prob. 9PSCh. 7.1 - Prob. 10PS
Ch. 7.1 - Prob. 11PSCh. 7.1 - Prob. 12PSCh. 7.1 - Prob. 13PSCh. 7.1 - Prob. 14PSCh. 7.1 - Prob. 15PSCh. 7.1 - Prob. 16PSCh. 7.1 - Prob. 17PSCh. 7.1 - Prob. 18PSCh. 7.1 - Use the illustration in Figure 7.12 to draw the...Ch. 7.1 - Prob. 20PSCh. 7.1 - Prob. 21PSCh. 7.1 - Prob. 22PSCh. 7.1 - Prob. 23PSCh. 7.1 - Prob. 24PSCh. 7.1 - Prob. 25PSCh. 7.1 - Prob. 26PSCh. 7.1 - Prob. 27PSCh. 7.1 - Carry out the constructions requested in Problems...Ch. 7.1 - Prob. 29PSCh. 7.1 - Prob. 30PSCh. 7.1 - Prob. 31PSCh. 7.1 - Prob. 32PSCh. 7.1 - Prob. 33PSCh. 7.1 - Prob. 34PSCh. 7.1 - Prob. 35PSCh. 7.1 - Prob. 36PSCh. 7.1 - Prob. 37PSCh. 7.1 - Prob. 38PSCh. 7.1 - Prob. 39PSCh. 7.1 - Prob. 40PSCh. 7.1 - Prob. 41PSCh. 7.1 - Prob. 42PSCh. 7.1 - Prob. 43PSCh. 7.1 - Prob. 44PSCh. 7.1 - Prob. 45PSCh. 7.1 - Prob. 46PSCh. 7.1 - Prob. 47PSCh. 7.1 - Prob. 48PSCh. 7.1 - Prob. 49PSCh. 7.1 - Prob. 50PSCh. 7.1 - Prob. 51PSCh. 7.1 - Study the patterns shown in Figure 7.13. When...Ch. 7.1 - Prob. 53PSCh. 7.1 - Prob. 54PSCh. 7.1 - Prob. 55PSCh. 7.1 - Prob. 56PSCh. 7.1 - Prob. 57PSCh. 7.1 - Prob. 58PSCh. 7.1 - The letters of the alphabet can be sorted into the...Ch. 7.1 - Prob. 60PSCh. 7.2 - Prob. 1PSCh. 7.2 - Prob. 2PSCh. 7.2 - Prob. 3PSCh. 7.2 - Prob. 4PSCh. 7.2 - Prob. 5PSCh. 7.2 - Prob. 6PSCh. 7.2 - Prob. 7PSCh. 7.2 - Prob. 8PSCh. 7.2 - Prob. 9PSCh. 7.2 - Prob. 10PSCh. 7.2 - Prob. 11PSCh. 7.2 - Prob. 12PSCh. 7.2 - Determine whether each sentence in Problems 11 14...Ch. 7.2 - Prob. 14PSCh. 7.2 - Prob. 15PSCh. 7.2 - Prob. 16PSCh. 7.2 - Prob. 17PSCh. 7.2 - Prob. 18PSCh. 7.2 - Prob. 19PSCh. 7.2 - Prob. 20PSCh. 7.2 - Prob. 21PSCh. 7.2 - Prob. 22PSCh. 7.2 - Prob. 23PSCh. 7.2 - Prob. 24PSCh. 7.2 - In Problems 25 32, classify the pairs of angles...Ch. 7.2 - Prob. 26PSCh. 7.2 - Prob. 27PSCh. 7.2 - Prob. 28PSCh. 7.2 - In Problems 25 32, classify the pairs of angles...Ch. 7.2 - Prob. 30PSCh. 7.2 - Prob. 31PSCh. 7.2 - Prob. 32PSCh. 7.2 - Prob. 33PSCh. 7.2 - Prob. 34PSCh. 7.2 - Prob. 35PSCh. 7.2 - Prob. 36PSCh. 7.2 - Prob. 37PSCh. 7.2 - Prob. 38PSCh. 7.2 - Prob. 39PSCh. 7.2 - Prob. 40PSCh. 7.2 - Prob. 41PSCh. 7.2 - Prob. 42PSCh. 7.2 - Prob. 43PSCh. 7.2 - Prob. 44PSCh. 7.2 - Prob. 45PSCh. 7.2 - Prob. 46PSCh. 7.2 - Prob. 47PSCh. 7.2 - Prob. 48PSCh. 7.2 - Prob. 49PSCh. 7.2 - Prob. 50PSCh. 7.2 - Prob. 51PSCh. 7.2 - In Problems 52 57, find the measures of all the...Ch. 7.2 - Prob. 53PSCh. 7.2 - Prob. 54PSCh. 7.2 - Prob. 55PSCh. 7.2 - Prob. 56PSCh. 7.2 - Prob. 57PSCh. 7.2 - Prob. 58PSCh. 7.2 - Prob. 59PSCh. 7.2 - Historical Quest: Allow me to start you on a...Ch. 7.3 - IN YOUR OWN WORDS What is a triangle?Ch. 7.3 - Prob. 2PSCh. 7.3 - IN YOUR OWN WORDS Explain the notation ABCDEF.Ch. 7.3 - Prob. 4PSCh. 7.3 - Prob. 5PSCh. 7.3 - Prob. 6PSCh. 7.3 - Prob. 7PSCh. 7.3 - Prob. 8PSCh. 7.3 - Prob. 9PSCh. 7.3 - Name the corresponding parts of the triangles in...Ch. 7.3 - In Problems 11-16, find the measure of the third...Ch. 7.3 - Prob. 12PSCh. 7.3 - Prob. 13PSCh. 7.3 - Prob. 14PSCh. 7.3 - Prob. 15PSCh. 7.3 - Prob. 16PSCh. 7.3 - Prob. 17PSCh. 7.3 - Prob. 18PSCh. 7.3 - Prob. 19PSCh. 7.3 - Prob. 20PSCh. 7.3 - Prob. 21PSCh. 7.3 - Prob. 22PSCh. 7.3 - Prob. 23PSCh. 7.3 - Prob. 24PSCh. 7.3 - Prob. 25PSCh. 7.3 - Prob. 26PSCh. 7.3 - Prob. 27PSCh. 7.3 - Prob. 28PSCh. 7.3 - Prob. 29PSCh. 7.3 - Prob. 30PSCh. 7.3 - Prob. 31PSCh. 7.3 - Prob. 32PSCh. 7.3 - Prob. 33PSCh. 7.3 - Prob. 34PSCh. 7.3 - Use algebra to find the value of x in each of the...Ch. 7.3 - Prob. 36PSCh. 7.3 - Prob. 37PSCh. 7.3 - Use algebra to find the value of x in each of the...Ch. 7.3 - Prob. 39PSCh. 7.3 - Prob. 40PSCh. 7.3 - Prob. 41PSCh. 7.3 - Prob. 42PSCh. 7.3 - Prob. 43PSCh. 7.3 - Prob. 44PSCh. 7.3 - Prob. 45PSCh. 7.3 - Prob. 46PSCh. 7.3 - Prob. 47PSCh. 7.3 - Prob. 48PSCh. 7.3 - Prob. 49PSCh. 7.3 - Prob. 50PSCh. 7.3 - Prob. 51PSCh. 7.3 - Prob. 52PSCh. 7.3 - Prob. 53PSCh. 7.3 - Prob. 54PSCh. 7.3 - Prob. 55PSCh. 7.3 - Prob. 56PSCh. 7.3 - The legs of a picnic table form a triangle where...Ch. 7.3 - Prob. 58PSCh. 7.3 - Prob. 59PSCh. 7.3 - Prob. 60PSCh. 7.4 - IN YOUR OWN WORDS Contrast congruent and similar...Ch. 7.4 - Prob. 2PSCh. 7.4 - In Problems 3-8, determine if the triangles are...Ch. 7.4 - Prob. 4PSCh. 7.4 - Prob. 5PSCh. 7.4 - Prob. 6PSCh. 7.4 - Prob. 7PSCh. 7.4 - Prob. 8PSCh. 7.4 - Prob. 9PSCh. 7.4 - Prob. 10PSCh. 7.4 - Prob. 11PSCh. 7.4 - Prob. 12PSCh. 7.4 - Prob. 13PSCh. 7.4 - Prob. 14PSCh. 7.4 - Prob. 15PSCh. 7.4 - Prob. 16PSCh. 7.4 - Prob. 17PSCh. 7.4 - Prob. 18PSCh. 7.4 - Prob. 19PSCh. 7.4 - Prob. 20PSCh. 7.4 - Prob. 21PSCh. 7.4 - Prob. 22PSCh. 7.4 - Prob. 23PSCh. 7.4 - Prob. 24PSCh. 7.4 - Prob. 25PSCh. 7.4 - Prob. 26PSCh. 7.4 - Prob. 27PSCh. 7.4 - Prob. 28PSCh. 7.4 - Prob. 29PSCh. 7.4 - Each figure in Problems 29-34 contains two similar...Ch. 7.4 - Prob. 31PSCh. 7.4 - Prob. 32PSCh. 7.4 - Prob. 33PSCh. 7.4 - Prob. 34PSCh. 7.4 - Prob. 35PSCh. 7.4 - Prob. 36PSCh. 7.4 - Given AC is perpendicular to MB, and ABC is an...Ch. 7.4 - Prob. 38PSCh. 7.4 - Prob. 39PSCh. 7.4 - Prob. 40PSCh. 7.4 - Use similar triangles and a proportion to find the...Ch. 7.4 - Prob. 42PSCh. 7.4 - Prob. 43PSCh. 7.4 - Prob. 44PSCh. 7.4 - Prob. 45PSCh. 7.4 - Prob. 46PSCh. 7.4 - A bell tower casts a shadow 45ft long. At the same...Ch. 7.4 - Prob. 48PSCh. 7.4 - Prob. 49PSCh. 7.4 - Prob. 50PSCh. 7.4 - Prob. 51PSCh. 7.4 - Prob. 52PSCh. 7.4 - Prob. 53PSCh. 7.4 - Prob. 54PSCh. 7.4 - Prob. 55PSCh. 7.4 - Suppose a 6- ft person wishes to determine the...Ch. 7.4 - Prob. 57PSCh. 7.4 - Prob. 58PSCh. 7.4 - Prob. 59PSCh. 7.4 - Prob. 60PSCh. 7.5 - Prob. 1PSCh. 7.5 - Prob. 2PSCh. 7.5 - Prob. 3PSCh. 7.5 - Prob. 4PSCh. 7.5 - Prob. 5PSCh. 7.5 - Prob. 6PSCh. 7.5 - Prob. 7PSCh. 7.5 - Prob. 8PSCh. 7.5 - Prob. 9PSCh. 7.5 - Prob. 10PSCh. 7.5 - Prob. 11PSCh. 7.5 - Prob. 12PSCh. 7.5 - Prob. 13PSCh. 7.5 - Prob. 14PSCh. 7.5 - Prob. 15PSCh. 7.5 - Prob. 16PSCh. 7.5 - Prob. 17PSCh. 7.5 - Prob. 18PSCh. 7.5 - Prob. 19PSCh. 7.5 - Prob. 20PSCh. 7.5 - Prob. 21PSCh. 7.5 - Prob. 22PSCh. 7.5 - Prob. 23PSCh. 7.5 - Prob. 24PSCh. 7.5 - Prob. 25PSCh. 7.5 - Prob. 26PSCh. 7.5 - Prob. 27PSCh. 7.5 - Prob. 28PSCh. 7.5 - Prob. 29PSCh. 7.5 - Prob. 30PSCh. 7.5 - Prob. 31PSCh. 7.5 - Prob. 32PSCh. 7.5 - Prob. 33PSCh. 7.5 - Prob. 34PSCh. 7.5 - Prob. 35PSCh. 7.5 - Prob. 36PSCh. 7.5 - Prob. 37PSCh. 7.5 - Prob. 38PSCh. 7.5 - Prob. 39PSCh. 7.5 - Prob. 40PSCh. 7.5 - Prob. 41PSCh. 7.5 - Prob. 42PSCh. 7.5 - Prob. 43PSCh. 7.5 - Prob. 44PSCh. 7.5 - Prob. 45PSCh. 7.5 - Prob. 46PSCh. 7.5 - Prob. 47PSCh. 7.5 - Level 2 If the angle from the horizontal to the...Ch. 7.5 - Prob. 49PSCh. 7.5 - Prob. 50PSCh. 7.5 - Prob. 51PSCh. 7.5 - Prob. 52PSCh. 7.5 - Prob. 53PSCh. 7.5 - Prob. 54PSCh. 7.5 - Prob. 55PSCh. 7.5 - Prob. 56PSCh. 7.5 - Prob. 57PSCh. 7.5 - Prob. 58PSCh. 7.5 - Prob. 59PSCh. 7.5 - Problem solving Level 3 a. If the distance from...Ch. 7.6 - Prob. 1PSCh. 7.6 - Prob. 2PSCh. 7.6 - Prob. 3PSCh. 7.6 - Prob. 4PSCh. 7.6 - Prob. 5PSCh. 7.6 - Prob. 6PSCh. 7.6 - Prob. 7PSCh. 7.6 - Prob. 8PSCh. 7.6 - Prob. 9PSCh. 7.6 - Prob. 10PSCh. 7.6 - Prob. 11PSCh. 7.6 - Prob. 12PSCh. 7.6 - Name the geometry Euclidean, elliptic, or...Ch. 7.6 - Prob. 14PSCh. 7.6 - Prob. 15PSCh. 7.6 - Prob. 16PSCh. 7.6 - Prob. 17PSCh. 7.6 - Prob. 18PSCh. 7.6 - Prob. 19PSCh. 7.6 - Prob. 20PSCh. 7.6 - Prob. 21PSCh. 7.6 - Prob. 22PSCh. 7.6 - Prob. 23PSCh. 7.6 - Prob. 24PSCh. 7.6 - Prob. 25PSCh. 7.6 - Prob. 26PSCh. 7.6 - Prob. 27PSCh. 7.6 - Prob. 28PSCh. 7.6 - Consider the top, front, and side views as shown...Ch. 7.6 - Prob. 30PSCh. 7.6 - Prob. 31PSCh. 7.6 - Prob. 32PSCh. 7.6 - Prob. 33PSCh. 7.6 - Prob. 34PSCh. 7.6 - Prob. 35PSCh. 7.6 - Prob. 36PSCh. 7.6 - Prob. 37PSCh. 7.6 - Prob. 38PSCh. 7.6 - Prob. 39PSCh. 7.6 - Prob. 40PSCh. 7.6 - Prob. 41PSCh. 7.6 - Prob. 42PSCh. 7.6 - Prob. 43PSCh. 7.6 - Prob. 44PSCh. 7.6 - Prob. 45PSCh. 7.6 - Prob. 46PSCh. 7.6 - Prob. 47PSCh. 7.6 - Prob. 48PSCh. 7.6 - Prob. 49PSCh. 7.6 - Prob. 50PSCh. 7.6 - Prob. 51PSCh. 7.6 - Prob. 52PSCh. 7.6 - Prob. 53PSCh. 7.6 - Prob. 54PSCh. 7.6 - When is an open book a closed book? If the...Ch. 7.6 - Prob. 56PSCh. 7.6 - Prob. 57PSCh. 7.6 - Prob. 58PSCh. 7.6 - Prob. 59PSCh. 7.CR - Prob. 1CRCh. 7.CR - Prob. 2CRCh. 7.CR - Prob. 3CRCh. 7.CR - Prob. 4CRCh. 7.CR - Prob. 5CRCh. 7.CR - Prob. 6CRCh. 7.CR - 7. Bourbon Palace Figure 7.77 is home to the...Ch. 7.CR - Prob. 8CRCh. 7.CR - Prob. 9CRCh. 7.CR - Prob. 10CRCh. 7.CR - Prob. 11CRCh. 7.CR - Prob. 12CRCh. 7.CR - Prob. 13CRCh. 7.CR - Prob. 14CRCh. 7.CR - Prob. 15CRCh. 7.CR - Prob. 16CRCh. 7.CR - Prob. 17CRCh. 7.CR - Prob. 18CRCh. 7.CR - Prob. 19CRCh. 7.CR - Prob. 20CR
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