Mathematical Statistics with Applications
Mathematical Statistics with Applications
7th Edition
ISBN: 9780495110811
Author: Dennis Wackerly, William Mendenhall, Richard L. Scheaffer
Publisher: Cengage Learning
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Chapter 13.10, Problem 52E
To determine

Construct a 95% confidence interval for the difference in mean CPU time required for the two computers.

Compare the answer with Part (c) of Exercise 12.10.

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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?
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 13 Solutions

Mathematical Statistics with Applications

Ch. 13.4 - It is believed that women in the postmenopausal...Ch. 13.4 - If vegetables intended for human consumption...Ch. 13.4 - One portion of the research described in a paper...Ch. 13.4 - The Florida Game and Fish Commission desires to...Ch. 13.4 - Prob. 15ECh. 13.4 - An experiment was conducted to examine the effect...Ch. 13.5 - Prob. 17ECh. 13.5 - Refer to Exercise 13.17 and consider YiYi for i ...Ch. 13.5 - Refer to the statistical model for the one-way...Ch. 13.7 - Refer to Examples 13.2 and 13.3. a Use the portion...Ch. 13.7 - Refer to Examples 13.2 and 13.4. a Use the portion...Ch. 13.7 - a Based on your answers to Exercises 13.20 and...Ch. 13.7 - Refer to Exercise 13.7. a Construct a 95%...Ch. 13.7 - Prob. 24ECh. 13.7 - Prob. 25ECh. 13.7 - Prob. 26ECh. 13.7 - Prob. 27ECh. 13.7 - Prob. 28ECh. 13.7 - Prob. 29ECh. 13.7 - Prob. 30ECh. 13.7 - Prob. 31ECh. 13.7 - Prob. 32ECh. 13.7 - Prob. 33ECh. 13.7 - Prob. 34ECh. 13.7 - Prob. 35ECh. 13.8 - Prob. 36ECh. 13.8 - Prob. 37ECh. 13.8 - Prob. 38ECh. 13.8 - Prob. 39ECh. 13.8 - Prob. 40ECh. 13.9 - Prob. 41ECh. 13.9 - The accompanying table presents data on yields...Ch. 13.9 - Refer to Exercise 13.42. Why was a randomized...Ch. 13.9 - Prob. 44ECh. 13.9 - Prob. 45ECh. 13.9 - Prob. 46ECh. 13.9 - Prob. 47ECh. 13.9 - Prob. 48ECh. 13.9 - Prob. 49ECh. 13.9 - Prob. 50ECh. 13.9 - Prob. 51ECh. 13.10 - Prob. 52ECh. 13.10 - Prob. 53ECh. 13.10 - Prob. 54ECh. 13.10 - Refer to Exercise 13.46. Construct a 95%...Ch. 13.10 - Prob. 56ECh. 13.10 - Prob. 57ECh. 13.11 - Prob. 58ECh. 13.11 - Prob. 59ECh. 13.11 - Prob. 60ECh. 13.11 - Prob. 61ECh. 13.11 - Prob. 62ECh. 13.12 - Prob. 63ECh. 13.12 - Prob. 64ECh. 13.12 - Prob. 65ECh. 13.12 - Prob. 66ECh. 13.12 - Prob. 67ECh. 13.12 - Prob. 68ECh. 13.13 - Prob. 69ECh. 13.13 - Prob. 70ECh. 13.13 - Refer to Exercise 13.42. Answer part (a) by...Ch. 13.13 - Refer to Exercise 13.45. Answer part (b) by...Ch. 13 - Prob. 73SECh. 13 - Prob. 74SECh. 13 - Prob. 75SECh. 13 - Prob. 77SECh. 13 - A study was initiated to investigate the effect of...Ch. 13 - Prob. 79SECh. 13 - A dealer has in stock three cars (models A, B, and...Ch. 13 - In the hope of attracting more riders, a city...Ch. 13 - Prob. 84SECh. 13 - Prob. 85SECh. 13 - Prob. 86SECh. 13 - Prob. 87SECh. 13 - Prob. 88SECh. 13 - Prob. 89SECh. 13 - Prob. 90SECh. 13 - Prob. 92SECh. 13 - Prob. 94SE
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