Discrete Mathematics With Applications
5th Edition
ISBN: 9781337694193
Author: EPP, Susanna S.
Publisher: Cengage Learning,
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Chapter 8.4, Problem 10TY
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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.)
Problem 4. Margrabe formula and the Greeks (20 pts)
In the homework, we determined the Margrabe formula for the price of an option allowing you to
swap an x-stock for a y-stock at time T. For stocks with initial values xo, yo, common volatility
σ and correlation p, the formula was given by
Fo=yo (d+)-x0Þ(d_),
where
In (±²
Ꭲ
d+
õ√T
and
σ = σ√√√2(1 - p).
дго
(a) We want to determine a "Greek" for ỡ on the option: find a formula for
θα
(b) Is
дго
θα
positive or negative?
(c) We consider a situation in which the correlation p between the two stocks increases: what
can you say about the price Fo?
(d) Assume that yo< xo and p = 1. What is the price of the option?
The Course Name Real Analysis please Solve questions by Real Analysis
Chapter 8 Solutions
Discrete Mathematics With Applications
Ch. 8.1 - If R is a relation from A to B, xA , and yB , the...Ch. 8.1 - Prob. 2TYCh. 8.1 - Prob. 3TYCh. 8.1 - Prob. 4TYCh. 8.1 - If R is a relation on a set A, the directed graph...Ch. 8.1 - As in Example 8.1.2, the congruence modulo 2...Ch. 8.1 - Prove that for all integers m and n,m-n is even...Ch. 8.1 - The congruence modulo 3 relation, T, is defined...Ch. 8.1 - Define a relation P on Z as follows: For every...Ch. 8.1 - Prob. 5ES
Ch. 8.1 - Let X={a,b,c}. Define a relation J on P(X) as...Ch. 8.1 - Define a relation R on Z as follows: For all...Ch. 8.1 - Prob. 8ESCh. 8.1 - Let A be the set of all strings of 0’s, 1’s, and...Ch. 8.1 - Let A={3,4,5} and B={4,5,6} and let R be the “less...Ch. 8.1 - Let A={3,4,5} and B={4,5,6} and let S be the...Ch. 8.1 - Prob. 12ESCh. 8.1 - Prob. 13ESCh. 8.1 - Draw the directed graphs of the relations defined...Ch. 8.1 - Draw the directed graphs of the relations defined...Ch. 8.1 - Prob. 16ESCh. 8.1 - Prob. 17ESCh. 8.1 - Draw the directed graphs of the relations defined...Ch. 8.1 - Exercises 19-20 refer to unions and intersections...Ch. 8.1 - Prob. 20ESCh. 8.1 - Define relation R and S on R as follows:...Ch. 8.1 - Prob. 22ESCh. 8.1 - Prob. 23ESCh. 8.1 - Prob. 24ESCh. 8.2 - For a relation R on a set A to be reflexive means...Ch. 8.2 - For a relation R on a set A to be symmetric means...Ch. 8.2 - For a relation R on a set A to be transitive means...Ch. 8.2 - Prob. 4TYCh. 8.2 - Prob. 5TYCh. 8.2 - Prob. 6TYCh. 8.2 - Prob. 7TYCh. 8.2 - Prob. 8TYCh. 8.2 - Prob. 9TYCh. 8.2 - Prob. 10TYCh. 8.2 - Prob. 1ESCh. 8.2 - In 1-8, a number of relations are defined on the...Ch. 8.2 - Prob. 3ESCh. 8.2 - Prob. 4ESCh. 8.2 - In 1-8, a number of relations are defined on the...Ch. 8.2 - In 1-8, a number of relations are defined on the...Ch. 8.2 - In 1-8, a number of relations are defined on the...Ch. 8.2 - In 1-8, a number of relations are defined on the...Ch. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - In 9—33, determine whether the given relation is...Ch. 8.2 - In 9—33, determine whether the given relation is...Ch. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - Prob. 15ESCh. 8.2 - Prob. 16ESCh. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - Prob. 18ESCh. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - Prob. 20ESCh. 8.2 - Prob. 21ESCh. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - Prob. 24ESCh. 8.2 - In 9-33, determine whether the given is reflexive...Ch. 8.2 - Prob. 26ESCh. 8.2 - Prob. 27ESCh. 8.2 - Prob. 28ESCh. 8.2 - Prob. 29ESCh. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - Prob. 31ESCh. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - In 9-33, determine whether the given relation is...Ch. 8.2 - In 34-36, assume that R is a relation on a et A....Ch. 8.2 - Prob. 35ESCh. 8.2 - Prob. 36ESCh. 8.2 - Prob. 37ESCh. 8.2 - Prob. 38ESCh. 8.2 - Prob. 39ESCh. 8.2 - Prob. 40ESCh. 8.2 - Prob. 41ESCh. 8.2 - In 37-42, assume that R and S are relations on a...Ch. 8.2 - In 43-50, the following definitions are used: A...Ch. 8.2 - Prob. 44ESCh. 8.2 - Prob. 45ESCh. 8.2 - Prob. 46ESCh. 8.2 - Prob. 47ESCh. 8.2 - In 43-50, the following definitions are used: A...Ch. 8.2 - Prob. 49ESCh. 8.2 - Prob. 50ESCh. 8.2 - Prob. 51ESCh. 8.2 - In 51—53, R, S, and T are relations defined on...Ch. 8.2 - Prob. 53ESCh. 8.2 - Prob. 54ESCh. 8.2 - Prob. 55ESCh. 8.2 - Prob. 56ESCh. 8.3 - For a relation on a set to be an equivalence...Ch. 8.3 - The notation m=n(modd) is...Ch. 8.3 - Prob. 3TYCh. 8.3 - Prob. 4TYCh. 8.3 - Prob. 5TYCh. 8.3 - Prob. 6TYCh. 8.3 - Prob. 1ESCh. 8.3 - Prob. 2ESCh. 8.3 - Prob. 3ESCh. 8.3 - In each of 3—6, the relation R is an equivalence...Ch. 8.3 - Prob. 5ESCh. 8.3 - In each of 3-6, the relation R is an equivalence...Ch. 8.3 - Prob. 7ESCh. 8.3 - Prob. 8ESCh. 8.3 - Prob. 9ESCh. 8.3 - In each of 7-14, relation R is an equivalence...Ch. 8.3 - Prob. 11ESCh. 8.3 - In each of 7-14, relation R is an equivalence...Ch. 8.3 - In each of 7-14, the relation R is an equivalence...Ch. 8.3 - In each of 7—14, the relation R is an equivalence...Ch. 8.3 - Determine which of the following congruence...Ch. 8.3 - Let R be the relation of congruence modulo 3....Ch. 8.3 - Prob. 17ESCh. 8.3 - Prob. 18ESCh. 8.3 - In 19-31, (1) prove that the relation is an...Ch. 8.3 - Prob. 20ESCh. 8.3 - Prob. 21ESCh. 8.3 - Prob. 22ESCh. 8.3 - Prob. 23ESCh. 8.3 - In 19-31. (1) prove that the relation is an...Ch. 8.3 - In 19-31,(1) prove that the relation is an...Ch. 8.3 - Prob. 26ESCh. 8.3 - Prob. 27ESCh. 8.3 - Prob. 28ESCh. 8.3 - Prob. 29ESCh. 8.3 - Prob. 30ESCh. 8.3 - In 19—31, (1) prove that the relation is an...Ch. 8.3 - Prob. 32ESCh. 8.3 - Prob. 33ESCh. 8.3 - Prob. 34ESCh. 8.3 - Prob. 35ESCh. 8.3 - Prob. 36ESCh. 8.3 - Prob. 37ESCh. 8.3 - Prob. 38ESCh. 8.3 - Prob. 39ESCh. 8.3 - Prob. 40ESCh. 8.3 - Prob. 41ESCh. 8.3 - Prob. 42ESCh. 8.3 - Prob. 43ESCh. 8.3 - Let A=Z+Z+ . Define a relation R on A as follows:...Ch. 8.3 - Prob. 45ESCh. 8.3 - Let R be a relation on a set A and suppose R is...Ch. 8.3 - Refer to the quote at the beginning of this...Ch. 8.4 - When letters of the alphabet are encrypted using...Ch. 8.4 - Prob. 2TYCh. 8.4 - Prob. 3TYCh. 8.4 - Prob. 4TYCh. 8.4 - Prob. 5TYCh. 8.4 - Prob. 6TYCh. 8.4 - Prob. 7TYCh. 8.4 - Prob. 8TYCh. 8.4 - Fermat’s little theorem says that if p is any...Ch. 8.4 - Prob. 10TYCh. 8.4 - Prob. 1ESCh. 8.4 - Use the Caesar cipher to encrypt the message AN...Ch. 8.4 - Prob. 3ESCh. 8.4 - Let a=68, b=33, and n=7. Verify that 7|(68-33)....Ch. 8.4 - Prove the transitivity of modular congruence. That...Ch. 8.4 - Prob. 6ESCh. 8.4 - Verify the following statements. 128=2(mod7) and...Ch. 8.4 - Verify the following statements. 45=3 (mod 6) and...Ch. 8.4 - Prob. 9ESCh. 8.4 - In 9-11, prove each of the given statements,...Ch. 8.4 - In 9-11, prove each of the given statements,...Ch. 8.4 - Prove that for every integer n0,10n=1(mod9) . Use...Ch. 8.4 - Prob. 13ESCh. 8.4 - Prob. 14ESCh. 8.4 - Prob. 15ESCh. 8.4 - In 16-18, use the techniques of Example 8.4.4 and...Ch. 8.4 - Prob. 17ESCh. 8.4 - Prob. 18ESCh. 8.4 - Prob. 19ESCh. 8.4 - Prob. 20ESCh. 8.4 - Prob. 21ESCh. 8.4 - In 19-24, use the RSA cipher from Examples 8.4.9...Ch. 8.4 - Prob. 23ESCh. 8.4 - Prob. 24ESCh. 8.4 - Prob. 25ESCh. 8.4 - Prob. 26ESCh. 8.4 - In 26 and 27, use the extended Euclidean algorithm...Ch. 8.4 - Prob. 28ESCh. 8.4 - Prob. 29ESCh. 8.4 - Prob. 30ESCh. 8.4 - Find an inverse for 210 modulo 13. Find appositive...Ch. 8.4 - Find an inverse for 41 modulo 660. Find the least...Ch. 8.4 - Prob. 33ESCh. 8.4 - Prob. 34ESCh. 8.4 - Prob. 35ESCh. 8.4 - In 36,37,39 and 40, use the RSA cipher with public...Ch. 8.4 - Prob. 37ESCh. 8.4 - Find the least positive inverse for 43 modulo 660.Ch. 8.4 - Prob. 39ESCh. 8.4 - Prob. 40ESCh. 8.4 - Prob. 41ESCh. 8.4 - Prob. 42ESCh. 8.4 - Prob. 43ESCh. 8.5 - Prob. 1TYCh. 8.5 - Prob. 2TYCh. 8.5 - Prob. 3TYCh. 8.5 - Prob. 4TYCh. 8.5 - Prob. 5TYCh. 8.5 - Prob. 6TYCh. 8.5 - Prob. 7TYCh. 8.5 - Prob. 8TYCh. 8.5 - Prob. 9TYCh. 8.5 - Prob. 10TYCh. 8.5 - Each of the following is a relation on {0,1,2,3}...Ch. 8.5 - Prob. 2ESCh. 8.5 - Let S be the set of all strings of a’s and b’s....Ch. 8.5 - Prob. 4ESCh. 8.5 - Prob. 5ESCh. 8.5 - Let P be the set of all people who have ever lived...Ch. 8.5 - Prob. 7ESCh. 8.5 - Prob. 8ESCh. 8.5 - Prob. 9ESCh. 8.5 - Suppose R and S are antisymmetric relations on a...Ch. 8.5 - Let A={a,b}, and supposeAhas the partial order...Ch. 8.5 - Prob. 12ESCh. 8.5 - Let A={a,b} . Describe all partial order relations...Ch. 8.5 - Let A={a,b,c}. Describe all partial order...Ch. 8.5 - Prob. 15ESCh. 8.5 - Consider the “divides” relation on each of the...Ch. 8.5 - Prob. 17ESCh. 8.5 - Let S={0,1} and consider the partial order...Ch. 8.5 - Let S={0,1} and consider the partial order...Ch. 8.5 - Let S={0,1} and consider the partial order...Ch. 8.5 - Consider the “divides” relation defined on the set...Ch. 8.5 - Prob. 22ESCh. 8.5 - Prob. 23ESCh. 8.5 - Prob. 24ESCh. 8.5 - Prob. 25ESCh. 8.5 - Prob. 26ESCh. 8.5 - Prob. 27ESCh. 8.5 - Prob. 28ESCh. 8.5 - Prob. 29ESCh. 8.5 - Prob. 30ESCh. 8.5 - Prob. 31ESCh. 8.5 - Prob. 32ESCh. 8.5 - Consider the set A={12,24,48,3,9} ordered by the...Ch. 8.5 - Suppose that R is a partial order relation on a...Ch. 8.5 - Prob. 35ESCh. 8.5 - The set A={2,4,3,6,12,18,24} is partially ordered...Ch. 8.5 - Find a chain of length 2 for the relation defined...Ch. 8.5 - Prob. 38ESCh. 8.5 - Prob. 39ESCh. 8.5 - Prob. 40ESCh. 8.5 - Prob. 41ESCh. 8.5 - Prob. 42ESCh. 8.5 - Prob. 43ESCh. 8.5 - Prob. 44ESCh. 8.5 - Prob. 45ESCh. 8.5 - Prob. 46ESCh. 8.5 - Prob. 47ESCh. 8.5 - Prob. 48ESCh. 8.5 - Prob. 49ESCh. 8.5 - A set S of jobs can be ordered by writing x_y to...Ch. 8.5 - Suppose the tasks described in Example 8.5.12...
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