Applied Statistics and Probability for Engineers
6th Edition
ISBN: 9781118539712
Author: Douglas C. Montgomery
Publisher: WILEY
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Chapter 9.4, Problem 77E
a.
To determine
Find the critical values for the test statistic
b.
To determine
Find the critical values for the test statistic
c.
To determine
Find the critical values for the test statistic
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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
Applied Statistics and Probability for Engineers
Ch. 9.1 - Prob. 1ECh. 9.1 - Prob. 2ECh. 9.1 - 9-3. The standard deviation of critical dimension...Ch. 9.1 - 9-4. The mean pull-off force of a connector...Ch. 9.1 - 9-5. A textile fiber manufacturer is investigating...Ch. 9.1 - 9-6. Repeat Exercise 9-5 using a sample size of n...Ch. 9.1 - 9-7. In Exercise 9-5, find the boundary of the...Ch. 9.1 - 9-8. In Exercise 9-5, calculate the probability of...Ch. 9.1 - 9-9. In Exercise 9-5, calculate the P-value if the...Ch. 9.1 - 9-10. The heat evolved in calories per grain of a...
Ch. 9.1 - Prob. 11ECh. 9.1 - 9-12. In Exercise 9-10, find the boundary of the...Ch. 9.1 - Prob. 13ECh. 9.1 - 9-14. In Exercise 9-10, calculate the P-value if...Ch. 9.1 - 9-15. A consumer products company is formulating a...Ch. 9.1 - 9-16. Repeat Exercise 9-15 assuming that the...Ch. 9.1 - 9-17. In Exercise 9-15, find the boundary of the...Ch. 9.1 - 9-18. In Exercise 9-15, calculate the probability...Ch. 9.1 - 9-19. In Exercise 9-15, calculate the P-value if...Ch. 9.1 - 9-20. A manufacturer is interested in the output...Ch. 9.1 - 9-21. Rework Exercise 9-20 when the sample size is...Ch. 9.1 - 9-22. In Exercise 9-20, find the boundary of the...Ch. 9.1 - 9-23. In Exercise 9-20, calculate the P-value if...Ch. 9.1 - 9-24. In Exercise 9-20, calculate the probability...Ch. 9.1 - 9-25. The proportion of adults living in Tempe,...Ch. 9.1 - 9-26. The proportion of residents in Phoenix...Ch. 9.1 - 9-27. A random sample of 500 registered voters in...Ch. 9.1 - 9-28. If we plot the probability of accepting H0:...Ch. 9.1 - 9-29. A quality-control inspector is testing a...Ch. 9.1 - 9-30. In the quality-control example of Exercise...Ch. 9.2 - 9-31. State the null and alternative hypothesis in...Ch. 9.2 - 9-32. A hypothesis will be used to test that a...Ch. 9.2 - Prob. 33ECh. 9.2 - 9-34. A hypothesis will be used to test that a...Ch. 9.2 - Prob. 35ECh. 9.2 - Prob. 36ECh. 9.2 - 9-37. For the hypothesis test H0: µ = 5 against...Ch. 9.2 - Prob. 38ECh. 9.2 - Prob. 39ECh. 9.2 - Prob. 40ECh. 9.2 - Prob. 41ECh. 9.2 - 9-42. The mean water temperature downstream from...Ch. 9.2 - 9-43. A manufacturer produces crankshafts for an...Ch. 9.2 - Prob. 44ECh. 9.2 - 9-45. The life in hours of a battery is known to...Ch. 9.2 - 9-46. An engineer who is studying the tensile...Ch. 9.2 - 9-47. Supercavitation is a propulsion technology...Ch. 9.2 - 9-48. A bearing used in an automotive application...Ch. 9.2 - Prob. 49ECh. 9.2 - 9-50. Humans are known to have a mean gestation...Ch. 9.2 - 9-51. The bacterial strain Acinetobacter has been...Ch. 9.3 - 9-52. A hypothesis will be used to test that a...Ch. 9.3 - Prob. 53ECh. 9.3 - Prob. 54ECh. 9.3 - Prob. 55ECh. 9.3 - Prob. 56ECh. 9.3 - Prob. 57ECh. 9.3 - Prob. 58ECh. 9.3 - Prob. 59ECh. 9.3 - Prob. 60ECh. 9.3 - Prob. 61ECh. 9.3 - 9-62. An article in the ASCE Journal of Energy...Ch. 9.3 - 9-63. A 1992 article in the Journal of the...Ch. 9.3 - 9-64. Cloud seeding has been studied for many...Ch. 9.3 - 9-65. The sodium content of twenty 300-gram boxes...Ch. 9.3 - 9-66. Consider the baseball coefficient of...Ch. 9.3 - Prob. 67ECh. 9.3 - 9-68. Reconsider the data from Medicine and...Ch. 9.3 - 9-69. Reconsider the tire testing experiment...Ch. 9.3 - 9-70. Reconsider the Izod impact test on PVC pipe...Ch. 9.3 - 9-71. Reconsider the television tube brightness...Ch. 9.3 - 9-72. Exercise 6-38 gave data on the heights of...Ch. 9.3 - 9-73. Exercise 6-41 describes testing golf balls...Ch. 9.3 - 9-74. Exercise 6-40 presented data on the...Ch. 9.3 - Prob. 75ECh. 9.3 - Prob. 76ECh. 9.4 - 9-77. Consider the test of against . What are the...Ch. 9.4 - Prob. 78ECh. 9.4 - Prob. 79ECh. 9.4 - Prob. 80ECh. 9.4 - Prob. 81ECh. 9.4 - Prob. 82ECh. 9.4 - 9-83. The data from Medicine and Science in Sports...Ch. 9.4 - 9-84. The data from Technometrics described in...Ch. 9.4 - Prob. 85ECh. 9.4 - 9-86. Data from an Izod impact test was described...Ch. 9.4 - 9-87. Data for tire life was described in Exercise...Ch. 9.4 - 9-88. If the standard deviation of hole diameter...Ch. 9.4 - 9-89. Recall the sugar content of the syrup in...Ch. 9.5 - 9-90. Consider the following computer output
Test...Ch. 9.5 - Prob. 91ECh. 9.5 - 9-92. Suppose that of 1000 customers surveyed, 850...Ch. 9.5 - Prob. 93ECh. 9.5 - 9-94. A random sample of 300 circuits generated 13...Ch. 9.5 - Prob. 95ECh. 9.5 - 9-96. A manufacturer of interocular lenses will...Ch. 9.5 - 9-97. A researcher claims that at least 10% of all...Ch. 9.5 - 9-98. An article in Fortune (September 21, 1992)...Ch. 9.5 - 9-99. The advertised claim for batteries for cell...Ch. 9.5 - 9-100. A random sample of 500 registered voters in...Ch. 9.5 - 9-101. In a random sample of 85 automobile engine...Ch. 9.5 - 9-102. A computer manufacturer ships laptop...Ch. 9.5 - 9-103. In a random sample of 500 handwritten zip...Ch. 9.5 - 9-104. Construct a 90% confidence interval for the...Ch. 9.5 - 9-105. Construct a 95% lower confidence interval...Ch. 9.7 - 9-106. Consider the following frequency table of...Ch. 9.7 - 9-107. Let X denote the number of flaws observed...Ch. 9.7 - 9-108. The number of calls arriving at a...Ch. 9.7 - 9-109. Consider the following frequency table of...Ch. 9.7 - Prob. 110ECh. 9.7 - 9-111. A group of civil engineering students has...Ch. 9.7 - 9-112. Reconsider Exercise 6-87. The data were the...Ch. 9.8 - 9-113. The Hopkins Forest is a 2600-acre forest...Ch. 9.8 - 9-114. Did survival rate for passengers on the...Ch. 9.8 - 9-115. A company operates four machines in three...Ch. 9.8 - 9-116. Patients in a hospital are classified as...Ch. 9.8 - 9-117. Grades in a statistics course and an...Ch. 9.8 - 9-118. An experiment with artillery shells yields...Ch. 9.8 - 9-119. A study is being made of the failures of an...Ch. 9.8 - Prob. 120ECh. 9.8 - Prob. 121ECh. 9.9 - 9-122. Ten samples were taken from a plating bath...Ch. 9.9 - 9-123. The titanium content in an aircraft-grade...Ch. 9.9 - 9-124. The impurity level (in ppm) is routinely...Ch. 9.9 - 9-125. Consider the margarine fat content data in...Ch. 9.9 - 9-126. Consider the compressive strength data in...Ch. 9.9 - 9-127. An inspector are measured the diameter of a...Ch. 9.9 - 9-128. A new type of tip can be used in a Rockwell...Ch. 9.9 - 9-129. A primer paint can be used on aluminum...Ch. 9.10 - Prob. 130ECh. 9.10 - Prob. 131ECh. 9.10 - 9-132. The mean breaking strength of a ceramic...Ch. 9.10 - Prob. 133ECh. 9.10 - Prob. 134ECh. 9.10 - Prob. 135ECh. 9.10 - Prob. 136ECh. 9.10 - Prob. 137ECh. 9 - Prob. 138SECh. 9 - Prob. 139SECh. 9 - Prob. 140SECh. 9 - Prob. 141SECh. 9 - 9-142. An article in Fire Technology [“An...Ch. 9 - Prob. 143SECh. 9 - 9-144. A manufacturer of semiconductor devices...Ch. 9 - Prob. 145SECh. 9 - Prob. 146SECh. 9 - 9-147. Suppose that in Exercise 9-146. the...Ch. 9 - Prob. 148SECh. 9 - Prob. 149SECh. 9 - Prob. 150SECh. 9 - Prob. 151SECh. 9 - Prob. 152SECh. 9 - Prob. 153SECh. 9 - Prob. 154SECh. 9 - Prob. 155SECh. 9 - 9-156. Consider the spot weld shear strength data...Ch. 9 - Prob. 157SECh. 9 - Prob. 158SECh. 9 - Prob. 159SECh. 9 - Prob. 160SECh. 9 - Prob. 161SECh. 9 - Prob. 162SECh. 9 - Prob. 163SECh. 9 - Prob. 164SECh. 9 - Prob. 165SECh. 9 - Prob. 166SECh. 9 - Prob. 167SECh. 9 - Prob. 168SECh. 9 - Prob. 169SECh. 9 - Prob. 170SECh. 9 - Prob. 171SECh. 9 - Prob. 172SECh. 9 - 9-167. Consider the fatty acid measurements for...Ch. 9 - Prob. 174SECh. 9 - 9-175. Let X1, X2, ..., Xn be a sample from an...
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