Fundamentals of Statistics (5th Edition)
5th Edition
ISBN: 9780134508306
Author: Michael Sullivan III
Publisher: PEARSON
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Textbook Question
Chapter 9.1, Problem 1AYU
A _____ _____ is the value of a statistic that estimates the value of a parameter.
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Students have asked these similar questions
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?
We consider a 4-dimensional stock price model given (under P) by
dẴ₁ = µ· Xt dt + йt · ΣdŴt
where (W) is an n-dimensional Brownian motion,
π = (0.02, 0.01, -0.02, 0.05),
0.2
0
0
0
0.3
0.4
0
0
Σ=
-0.1
-4a За
0
0.2
0.4 -0.1 0.2)
and a E R. We assume that ☑0 = (1, 1, 1, 1) and that the interest rate on the market is r = 0.02.
(a) Give a condition on a that would make stock #3 be the one with largest volatility.
(b) Find the diversification coefficient for this portfolio as a function of a.
(c) Determine the maximum diversification coefficient d that you could reach by varying the
value of a?
2
Chapter 9 Solutions
Fundamentals of Statistics (5th Edition)
Ch. 9.1 - A _____ _____ is the value of a statistic that...Ch. 9.1 - The _____ ___ _____ represents the expected...Ch. 9.1 - True or False: A 95% confidence interval for a...Ch. 9.1 - The value z2 represents the of the distribution.Ch. 9.1 - As the level of confidence of a confidence...Ch. 9.1 - As the sample size used to obtain a confidence...Ch. 9.1 - In Problems 710, determine the critical value z/2...Ch. 9.1 - In Problems 710, determine the critical value z/2...Ch. 9.1 - In Problems 710, determine the critical value z/2...Ch. 9.1 - In Problems 710, determine the critical value z/2...
Ch. 9.1 - In Problems 1114, determine the point estimate of...Ch. 9.1 - In Problems 1114, determine the point estimate of...Ch. 9.1 - In Problems 1114, determine the point estimate of...Ch. 9.1 - In Problems 1114, determine the point estimate of...Ch. 9.1 - In Problems 1520, construct a confidence interval...Ch. 9.1 - In Problems 1520, construct a confidence interval...Ch. 9.1 - In Problems 1520, construct a confidence interval...Ch. 9.1 - In Problems 1520, construct a confidence interval...Ch. 9.1 - Prob. 19AYUCh. 9.1 - In Problems 1520, construct a confidence interval...Ch. 9.1 - NW You Explain It! New Deal Policies In response...Ch. 9.1 - Prob. 22AYUCh. 9.1 - You Explain It! Valentines Day A Rasmussen Reports...Ch. 9.1 - Prob. 24AYUCh. 9.1 - NW Giving Blood A survey of 2306 adult Americans...Ch. 9.1 - Saving for Retirement? A Retirement Confidence...Ch. 9.1 - Luxury or Necessity? A random sample of 1003 adult...Ch. 9.1 - Family Values In a USA Today/Gallup poll, 768 of...Ch. 9.1 - Prob. 29AYUCh. 9.1 - Reading In a survey of 700 community college...Ch. 9.1 - Phone in the John In a survey conducted by the...Ch. 9.1 - Deficit Reduction The Sullivan Statistics Survey I...Ch. 9.1 - Random Walk Go to...Ch. 9.1 - Language The Sullivan Statistics Survey I asks, Is...Ch. 9.1 - NW High-Speed Internet Access A researcher wishes...Ch. 9.1 - Home Ownership An urban economist wishes to...Ch. 9.1 - A Penny for Your Thoughts A researcher for the...Ch. 9.1 - Credit-Card Debt A school administrator is...Ch. 9.1 - Football Fans A television sports commentator...Ch. 9.1 - Prob. 40AYUCh. 9.1 - Prob. 41AYUCh. 9.1 - Prob. 42AYUCh. 9.1 - Senate Race Gallup polled 982 likely voters...Ch. 9.1 - Cauliflower? Jane wants to estimate the proportion...Ch. 9.1 - Walk to Work Alan wants to estimate the proportion...Ch. 9.1 - Putting It Together: Hand Washing The American...Ch. 9.1 - Prob. 48AYUCh. 9.1 - Prob. 49AYUCh. 9.1 - Prob. 50AYUCh. 9.1 - Prob. 51AYUCh. 9.1 - Prob. 52AYUCh. 9.1 - Prob. 53AYUCh. 9.1 - The 114th Congress of the United States of America...Ch. 9.2 - As the number of degrees of freedom in the...Ch. 9.2 - True or False: The t-distribution is centered at .Ch. 9.2 - The notation t is the t-value such that the area...Ch. 9.2 - True or False: The value of t0.10 with 5 degrees...Ch. 9.2 - True or False: To construct a confidence interval...Ch. 9.2 - Prob. 6AYUCh. 9.2 - NW a. Find the t-value such that the area in the...Ch. 9.2 - a. Find the t-value such that the area in the...Ch. 9.2 - In Problems 912. a simple random sample of size n ...Ch. 9.2 - In Problems 912. a simple random sample of size n ...Ch. 9.2 - In Problems 912. a simple random sample of size n ...Ch. 9.2 - In Problems 912. a simple random sample of size n ...Ch. 9.2 - In Problems 1316, determine the point estimate of...Ch. 9.2 - In Problems 1316, determine the point estimate of...Ch. 9.2 - Prob. 15AYUCh. 9.2 - In Problems 1316, determine the point estimate of...Ch. 9.2 - A simple random sample of size n is drawn from a...Ch. 9.2 - A simple random sample of size n is drawn from a...Ch. 9.2 - Prob. 19AYUCh. 9.2 - A simple random sample of size n is drawn. The...Ch. 9.2 - You Explain It! Hours Worked In a survey conducted...Ch. 9.2 - You Explain It! Sleeping A 90% confidence interval...Ch. 9.2 - Prob. 23AYUCh. 9.2 - Prob. 24AYUCh. 9.2 - Hours Worked Revisited For the Hours Worked survey...Ch. 9.2 - Sleeping Revisited Refer to the Sleeping results...Ch. 9.2 - Blood Alcohol Concentration A random sample of 51...Ch. 9.2 - Hungry or Thirsty? How much time do Americans...Ch. 9.2 - Tootsie Pops A Tootsie Pop is a sucker with a...Ch. 9.2 - How Much Do You Read? A recent Gallup poll asked...Ch. 9.2 - NW pH of Rain The following data represent the pH...Ch. 9.2 - Travel Taxes Travelers pay taxes for flying, car...Ch. 9.2 - Crash Test Results The following data represent...Ch. 9.2 - Crawling Babies The following data represent the...Ch. 9.2 - Housing Starts The following data represent the...Ch. 9.2 - PepsiCo Stock Volume The trade volume of a stock...Ch. 9.2 - Tornadoes Go to...Ch. 9.2 - Tax Rate The Sullivan Statistics Survey II asks,...Ch. 9.2 - Prob. 39AYUCh. 9.2 - Prob. 40AYUCh. 9.2 - NW Sample Size Dr. Paul Oswiecmiski wants to...Ch. 9.2 - Sample Size Dr. Paul Oswiecmiski wants to estimate...Ch. 9.2 - Reading A recent Gallup poll asked Americans to...Ch. 9.2 - Television A researcher wanted to determine the...Ch. 9.2 - Prob. 45AYUCh. 9.2 - Effect of Outliers The following small data set...Ch. 9.2 - Putting It Together: Smoking Cessation Study...Ch. 9.2 - How Many Drinks? A question on the General Social...Ch. 9.2 - Prob. 51AYUCh. 9.2 - The procedure for constructing a t-interval is...Ch. 9.2 - Prob. 53AYUCh. 9.2 - Prob. 54AYUCh. 9.2 - Suppose you have two populations: Population AAll...Ch. 9.2 - Prob. 56AYUCh. 9.3 - For what type of variable does it make sense to...Ch. 9.3 - For what type of variable does it makes sense to...Ch. 9.3 - What requirements must be satisfied in order to...Ch. 9.3 - What requirements must be satisfied in order to...Ch. 9.3 - In Problems 512, construct the appropriate...Ch. 9.3 - Prob. 6AYUCh. 9.3 - Prob. 7AYUCh. 9.3 - Prob. 8AYUCh. 9.3 - Prob. 9AYUCh. 9.3 - Prob. 10AYUCh. 9.3 - Prob. 11AYUCh. 9.3 - Prob. 12AYUCh. 9.3 - Prob. 13AYUCh. 9.3 - Prob. 14AYUCh. 9.3 - Worried about Retirement? In a survey of 1008...Ch. 9.3 - Theme Park Spending In a random sample of 40...Ch. 9.3 - Fastball Clayton Kershaw of the Los Angeles...Ch. 9.3 - Prob. 18AYUCh. 9.3 - Sleep Apnea and Gum Disease Sleep apnea is a...Ch. 9.3 - Weight Gain Researchers conducted a study to see...Ch. 9.3 - Prob. 21AYUCh. 9.3 - Researchers at the Gallup Organization asked a...Ch. 9.3 - A researcher wanted to know whether consumption of...Ch. 9.3 - Prob. 24AYUCh. 9 - Find the critical t-value for constructing a...Ch. 9 - IQ Scores Many of the examples and exercises in...Ch. 9 - Prob. 3RECh. 9 - Prob. 4RECh. 9 - The area under the t-distribution with 18 degrees...Ch. 9 - Which is larger, the area under the t-distribution...Ch. 9 - Prob. 7RECh. 9 - A simple random sample of size n is drawn from a...Ch. 9 - A simple random sample of size n is drawn from a...Ch. 9 - Long Life? In a survey of 35 adult Americans, it...Ch. 9 - Prob. 11RECh. 9 - Prob. 12RECh. 9 - Prob. 13RECh. 9 - Prob. 14RECh. 9 - Hypertension In a random sample of 678 adult males...Ch. 9 - Prob. 1CTCh. 9 - Prob. 2CTCh. 9 - A question on the General Social Survey was this:...Ch. 9 - Prob. 4CTCh. 9 - The campus at Joliet Junior College has a lake. A...Ch. 9 - From a random sample of 1201 Americans, it was...Ch. 9 - Wimbledon Match Lengths A tennis enthusiast wants...
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