Introductory Statistics (2nd Edition)
2nd Edition
ISBN: 9780321978271
Author: Robert Gould, Colleen N. Ryan
Publisher: PEARSON
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Chapter 9, Problem 54SE
a .
To determine
Determine whether the provided situation has independent or paired (dependent) samples.
b .
To determine
Determine whether the provided situation has independent or paired (dependent) samples.
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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
Introductory Statistics (2nd Edition)
Ch. 9 - Ages A study of all the students at a small...Ch. 9 - Units A survey of 100 random full-time students at...Ch. 9 - Exam Scores The distribution of the scores on a...Ch. 9 - Exam Scores The distribution of the scores on a...Ch. 9 - Prob. 5SECh. 9 - Cellphone Calls Answers.com claims that the mean...Ch. 9 - Retirement Income Several times during the year,...Ch. 9 - Time Employed A human resources manager for a...Ch. 9 - Prob. 9SECh. 9 - Prob. 10SE
Ch. 9 - Babies Weights (Example 2) Some sources report...Ch. 9 - Babies’ Weights, Again Some sources report that...Ch. 9 - Prob. 13SECh. 9 - Prob. 14SECh. 9 - CLT Shapes (Example 4) One of the histograms is a...Ch. 9 - Prob. 16SECh. 9 - Prob. 17SECh. 9 - Student Ages The mean age of all 2550 students at...Ch. 9 - Prob. 19SECh. 9 - Prob. 20SECh. 9 - Prob. 21SECh. 9 - Prob. 22SECh. 9 - Prob. 23SECh. 9 - Random Numbers If you take samples of 40 lines...Ch. 9 - t* (Example 8) A researcher collects one sample of...Ch. 9 - t* A researcher collects a sample of 25...Ch. 9 - Hamburgers (Example 9) A hamburger chain sells...Ch. 9 - Drinks A fast-food chain sells drinks that it...Ch. 9 - Men’s Pulse Rates (Example 10) A random sample of...Ch. 9 - Prob. 30SECh. 9 - Prob. 31SECh. 9 - Prob. 32SECh. 9 - Confidence Interval Changes State whether each of...Ch. 9 - Confidence Interval Changes State whether each of...Ch. 9 - Potatoes The weights of four randomly and...Ch. 9 - Tomatoes The weights of four randomly and...Ch. 9 - Human Body Temperatures (Example 12) A random...Ch. 9 - Reaction Distance Data on the disk and website...Ch. 9 - Potatoes Use the data from exercise 9.35. a. If...Ch. 9 - Tomatoes Use the data from exercise 9.36. a. Using...Ch. 9 - Cholesterol In the U.S. Department of Health has...Ch. 9 - BMI A body mass index (BMI) of more than 25 is...Ch. 9 - Male Height In the United States, the population...Ch. 9 - Vegetarians' Weights The mean weight of all...Ch. 9 - GPAs Thirty GPAs from a randomly selected sample...Ch. 9 - Prob. 46SECh. 9 - GPAs Using the data from Exercise 9.45 on GPAs,...Ch. 9 - Prob. 48SECh. 9 - Atkins Diet Difference Ten people went on an...Ch. 9 - Pulse Difference The following numbers are the...Ch. 9 - Student Ages Suppose that 200 statistics students...Ch. 9 - Presidents’ Ages at Inauguration A 95 confidence...Ch. 9 - Prob. 53SECh. 9 - Prob. 54SECh. 9 - Televisions: CI (Example 14) Minitab output is...Ch. 9 - Pulse and Gender: CI Using data from NHANES, we...Ch. 9 - Televisions (Example 15) The table shows the...Ch. 9 - Pulse Rates Using data from NHANES, we looked at...Ch. 9 - Triglycerides Triglycerides are a form of fat...Ch. 9 - Systolic Blood Pressures When you have your blood...Ch. 9 - Triglycerides, Again Report and interpret the 95...Ch. 9 - Blood Pressures, Again Report and interpret the 95...Ch. 9 - Clothes Spending A random sample of 14 college...Ch. 9 - College Athletes’ Weights A random sample of male...Ch. 9 - Prob. 65SECh. 9 - College Athletes’ Weights In exercise 9.64, you...Ch. 9 - Textbook Prices, UCSB vs. CSUN (Example 16) The...Ch. 9 - Textbook Prices. OC vs. CSUN The prices of a...Ch. 9 - Females’ Pulse Rates before and after a Fright...Ch. 9 - Males’ Pulse Rates before and after a Fright...Ch. 9 - Organic Food A student compared organic food...Ch. 9 - Smoking Mothers The birth weights of 35 babies...Ch. 9 - Ages of Brides and Grooms Data for the ages of...Ch. 9 - Surfers Surfers and statistics students Rex...Ch. 9 - Self-Reported Heights of Men (Example 18) A random...Ch. 9 - Eating Out Jacqueline Loya, a statistics student,...Ch. 9 - 9.77, 9.79, and 9.80 For these questions, the data...Ch. 9 - Prob. 78SECh. 9 - 9.77, 9.79, and 9.80 For these questions, the data...Ch. 9 - 9.77, 9.79, and 9.80 For these questions, the data...Ch. 9 - Choose a test for each situation: one-sample...Ch. 9 - Choose a t-test for each situation: one-sample...Ch. 9 - Cones: 3 Tests A McDonald’s fact sheet says its...Ch. 9 - Prob. 84CRECh. 9 - Brain Size Brain size for 20 random women and 20...Ch. 9 - Prob. 86CRECh. 9 - Heart Rate before and after Coffee Elena Lucin, a...Ch. 9 - Exam Grades The final exam grades for a sample of...Ch. 9 - Hours of Television Viewing The number of hours...Ch. 9 - Reaction Distances Reaction distances in...Ch. 9 - Shift Sleep Hours A survey was done comparing the...Ch. 9 - Prob. 92CRECh. 9 - Maximum Tax Rate A random sample of 10 Democrats...Ch. 9 - Prob. 94CRECh. 9 - Groceries The table shows the prices of identical...Ch. 9 - Parents The following table shows the heights (in...Ch. 9 - Why Is n1 in the Sample Standard Deviation? Why do...Ch. 9 - Prob. 98CRECh. 9 - Construct two sets of body temperatures (in...Ch. 9 - Construct heights for 3 or more sets of twins (6...
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