Numerical Analysis
3rd Edition
ISBN: 9780134696454
Author: Sauer, Tim
Publisher: Pearson,
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Chapter 8.3, Problem 12CP
To determine
To solve: The elliptic partial differential equation given in the problem by finite difference method by Matlab program.
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Chapter 8 Solutions
Numerical Analysis
Ch. 8.1 - Prove that the functions (a) u(x,t)=e2t+x+e2tx,...Ch. 8.1 - Prove that the functions (a) u(x,t)=etsinx, (b)...Ch. 8.1 - Prove that if f(x) is a degree 3 polynomial, then...Ch. 8.1 - Prob. 4ECh. 8.1 - Verify the eigenvector equation (8.13).Ch. 8.1 - Show that the nonzero vectors vj in (8.12 ), for...Ch. 8.1 - Prob. 1CPCh. 8.1 - Consider the equation ut=uxx for 0x1, 0t1 with the...Ch. 8.1 - Prob. 3CPCh. 8.1 - Use the Backward Difference Method to solve the...
Ch. 8.1 - Use the Crank-Nicolson Method to solve the...Ch. 8.1 - Prob. 6CPCh. 8.1 - Prob. 7CPCh. 8.1 - Setting C=D=1 in the population model (8.26), use...Ch. 8.2 - Prove that the functions (a) u(x,t)=sinxcos4t, (b)...Ch. 8.2 - Prove that the functions (a) u(x,t)=sinxsin2t, (b)...Ch. 8.2 - Prove that u1(x,t)=sinxcosct and u2(x,t)=ex+ct are...Ch. 8.2 - Prove that if s(X) is twice differentiable, then...Ch. 8.2 - Prove that the eigenvalues of A in (8.33) lie...Ch. 8.2 - Let be a complex number. (a) Prove that if +1/ is...Ch. 8.2 - Solve the initial-boundary value problems in...Ch. 8.2 - Solve the initial-boundary value problems in...Ch. 8.2 - Prob. 3CPCh. 8.2 - Prob. 4CPCh. 8.3 - Show that u(x,y)=ln(x2+y2) is a solution to the...Ch. 8.3 - Prob. 2ECh. 8.3 - Prove that the functions (a) u(x,y)=eysinx, (b)...Ch. 8.3 - Prove that the functions (a) u(x,y)=exy, (b)...Ch. 8.3 - Prove that the functions (a) u(x,y)=sin2xy, (b)...Ch. 8.3 - Prove that the functions (a) u(x,y)=ex+2y, (b)...Ch. 8.3 - Prob. 7ECh. 8.3 - Show that the barycenter of a triangle with...Ch. 8.3 - Prove Lemma 8.9 .Ch. 8.3 - Prove Lemma 8.10.Ch. 8.3 - Prob. 11ECh. 8.3 - Prob. 12ECh. 8.3 - Prob. 13ECh. 8.3 - Solve the Laplace equation problems in Exercise 3...Ch. 8.3 - Prob. 2CPCh. 8.3 - Prob. 3CPCh. 8.3 - Prob. 4CPCh. 8.3 - Prob. 5CPCh. 8.3 - The steady-state temperature u on a heated copper...Ch. 8.3 - Prob. 7CPCh. 8.3 - Prob. 8CPCh. 8.3 - Solve the Laplace equation problems in Exercise 3...Ch. 8.3 - Solve the Poisson equation problems in Exercise 4...Ch. 8.3 - Solve the elliptic partial differential equations...Ch. 8.3 - Prob. 12CPCh. 8.3 - Prob. 13CPCh. 8.3 - Solve the elliptic partial differential equations...Ch. 8.3 - Prob. 15CPCh. 8.3 - Prob. 16CPCh. 8.3 - For the elliptic equations in Exercise 7, make a...Ch. 8.3 - Solve the Laplace equation with Dirichlet boundary...Ch. 8.4 - Show that for any constant c, the function...Ch. 8.4 - Show that over an interval [ x1,xr ] not...Ch. 8.4 - Prob. 3ECh. 8.4 - Prob. 4ECh. 8.4 - Prob. 5ECh. 8.4 - Prob. 6ECh. 8.4 - Prob. 1CPCh. 8.4 - Prob. 2CPCh. 8.4 - Solve Fishers equation (8.69) with...Ch. 8.4 - Prob. 4CPCh. 8.4 - Solve the Brusselator equations for...Ch. 8.4 - Prob. 6CP
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- Question 2. An American option on a stock has payoff given by F = f(St) when it is exercised at time t. We know that the function f is convex. A person claims that because of convexity, it is optimal to exercise at expiration T. Do you agree with them?arrow_forwardQuestion 4. We consider a CRR model with So == 5 and up and down factors u = 1.03 and d = 0.96. We consider the interest rate r = 4% (over one period). Is this a suitable CRR model? (Explain your answer.)arrow_forwardQuestion 3. We want to price a put option with strike price K and expiration T. Two financial advisors estimate the parameters with two different statistical methods: they obtain the same return rate μ, the same volatility σ, but the first advisor has interest r₁ and the second advisor has interest rate r2 (r1>r2). They both use a CRR model with the same number of periods to price the option. Which advisor will get the larger price? (Explain your answer.)arrow_forward
- Question 5. We consider a put option with strike price K and expiration T. This option is priced using a 1-period CRR model. We consider r > 0, and σ > 0 very large. What is the approximate price of the option? In other words, what is the limit of the price of the option as σ∞. (Briefly justify your answer.)arrow_forwardQuestion 6. You collect daily data for the stock of a company Z over the past 4 months (i.e. 80 days) and calculate the log-returns (yk)/(-1. You want to build a CRR model for the evolution of the stock. The expected value and standard deviation of the log-returns are y = 0.06 and Sy 0.1. The money market interest rate is r = 0.04. Determine the risk-neutral probability of the model.arrow_forwardSeveral markets (Japan, Switzerland) introduced negative interest rates on their money market. In this problem, we will consider an annual interest rate r < 0. We consider a stock modeled by an N-period CRR model where each period is 1 year (At = 1) and the up and down factors are u and d. (a) We consider an American put option with strike price K and expiration T. Prove that if <0, the optimal strategy is to wait until expiration T to exercise.arrow_forward
- We consider an N-period CRR model where each period is 1 year (At = 1), the up factor is u = 0.1, the down factor is d = e−0.3 and r = 0. We remind you that in the CRR model, the stock price at time tn is modeled (under P) by Sta = So exp (μtn + σ√AtZn), where (Zn) is a simple symmetric random walk. (a) Find the parameters μ and σ for the CRR model described above. (b) Find P Ste So 55/50 € > 1). StN (c) Find lim P 804-N (d) Determine q. (You can use e- 1 x.) Ste (e) Find Q So (f) Find lim Q 004-N StN Soarrow_forwardIn this problem, we consider a 3-period stock market model with evolution given in Fig. 1 below. Each period corresponds to one year. The interest rate is r = 0%. 16 22 28 12 16 12 8 4 2 time Figure 1: Stock evolution for Problem 1. (a) A colleague notices that in the model above, a movement up-down leads to the same value as a movement down-up. He concludes that the model is a CRR model. Is your colleague correct? (Explain your answer.) (b) We consider a European put with strike price K = 10 and expiration T = 3 years. Find the price of this option at time 0. Provide the replicating portfolio for the first period. (c) In addition to the call above, we also consider a European call with strike price K = 10 and expiration T = 3 years. Which one has the highest price? (It is not necessary to provide the price of the call.) (d) We now assume a yearly interest rate r = 25%. We consider a Bermudan put option with strike price K = 10. It works like a standard put, but you can exercise it…arrow_forwardIn this problem, we consider a 2-period stock market model with evolution given in Fig. 1 below. Each period corresponds to one year (At = 1). The yearly interest rate is r = 1/3 = 33%. This model is a CRR model. 25 15 9 10 6 4 time Figure 1: Stock evolution for Problem 1. (a) Find the values of up and down factors u and d, and the risk-neutral probability q. (b) We consider a European put with strike price K the price of this option at time 0. == 16 and expiration T = 2 years. Find (c) Provide the number of shares of stock that the replicating portfolio contains at each pos- sible position. (d) You find this option available on the market for $2. What do you do? (Short answer.) (e) We consider an American put with strike price K = 16 and expiration T = 2 years. Find the price of this option at time 0 and describe the optimal exercising strategy. (f) We consider an American call with strike price K ○ = 16 and expiration T = 2 years. Find the price of this option at time 0 and describe…arrow_forward
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