MATLAB: An Introduction with Applications
6th Edition
ISBN: 9781119256830
Author: Amos Gilat
Publisher: John Wiley & Sons Inc
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Chapter 9, Problem 26P
An approximate map of Lake Erie is shown in the figure. Use numerical
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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 9 Solutions
MATLAB: An Introduction with Applications
Ch. 9 - Prob. 1PCh. 9 - Determine the solution of the equation 3...Ch. 9 - Determine the three roots of the equation...Ch. 9 - Determine the positive roots of the equation...Ch. 9 - The area Aof a circle segment is given by:...Ch. 9 - The position s of the slider as a function of in...Ch. 9 - The van der Waals equation gives a relationship...Ch. 9 - An estimate of the minimum velocity required for a...Ch. 9 - A series RLC circuit with an AC voltage source is...Ch. 9 - For fluid flow in a pipe, the Colebrook-White (or...
Ch. 9 - Using MATLAB’s built-in function fminbnd,...Ch. 9 - A flat rectangular sheet of metal that is 70 in....Ch. 9 - Using MATLAB’s built-in function fminbnd,...Ch. 9 - A prismatic box with equilateral triangular base...Ch. 9 - An RLC circuit with an alternating voltage source...Ch. 9 - A 108-in.-long beam AB is attached to the wall...Ch. 9 - Use MATLAB to calcute the following integrals: (a)...Ch. 9 - Use MATLAB to calculate the following integrals:...Ch. 9 - The speed of a race car during the first 7 s of a...Ch. 9 - A rubber band is stretched by fixing one end...Ch. 9 - Use numerical integration to approximate the size...Ch. 9 - The electric wire that connects the house to the...Ch. 9 - The flow rate Q (volume of fluid per second) in a...Ch. 9 - Prob. 24PCh. 9 - The variation of gravitational acceleration g with...Ch. 9 - An approximate map of Lake Erie is shown in the...Ch. 9 - To estimate the surface area and volume of a...Ch. 9 - Prob. 28PCh. 9 - The orbit of Mercury is elliptical in shape, with...Ch. 9 - Prob. 30PCh. 9 - Use a MATLAB built-in function to numerically...Ch. 9 - Use a MATLAB built-in function to numerically...Ch. 9 - Prob. 33PCh. 9 - Use a MATLAB built-in funtion to numerically...Ch. 9 - The growth of a fish is often modeled by the von...Ch. 9 - A water tank shaped as a cone (R = 2 m, H = 4 m)...Ch. 9 - The sudden outbreak of an insect population can be...Ch. 9 - An airplane uses a parachute and other means of...Ch. 9 - The population growth of species with limited...Ch. 9 - An RL circuit includes a voltage source vs, a...Ch. 9 - Growth of many organisms can be modeled with the...Ch. 9 - The velocity, v, of an object that falls freely...
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