Statistics, Binder Ready Version: Unlocking the Power of Data
2nd Edition
ISBN: 9781119163664
Author: Robin H. Lock, Patti Frazer Lock, Kari Lock Morgan, Eric F. Lock, Dennis F. Lock
Publisher: WILEY
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Chapter 4.4, Problem 153E
a.
To determine
Obtain the p-value.
b.
To determine
Make a conclusion in the context based on a level of significance of 0.05 and the p-value obtained in Part (a).
c.
To determine
Obtain the p-value.
d.
To determine
Make a conclusion in the context based on a level of significance of 0.05 and the p-value obtained in Part (c).
e.
To determine
Check whether the study analyzed in Parts (a)‑ (d) make a Type I, Type II, or no error.
f.
To determine
Check whether the nature study makes a Type I, Type II, or no error.
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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 4 Solutions
Statistics, Binder Ready Version: Unlocking the Power of Data
Ch. 4.1 - Prob. 1ECh. 4.1 - Prob. 2ECh. 4.1 - Prob. 3ECh. 4.1 - In Exercises 4.1 to 4.4, a situation is described...Ch. 4.1 - Prob. 5ECh. 4.1 - Prob. 6ECh. 4.1 - Prob. 7ECh. 4.1 - Prob. 8ECh. 4.1 - In Exercises 4.9 to 4.13, a situation is described...Ch. 4.1 - Prob. 10E
Ch. 4.1 - In Exercises 4.9 to 4.13, a situation is described...Ch. 4.1 - Prob. 12ECh. 4.1 - Prob. 13ECh. 4.1 - In Exercises 4.14 and 4.15, determine whether the...Ch. 4.1 - In Exercises 4.14 and 4.15, determine whether the...Ch. 4.1 - Pesticides and ADHD Are children with higher...Ch. 4.1 - Beer and Mosquitoes Does consuming beer attract...Ch. 4.1 - Prob. 18ECh. 4.1 - Prob. 19ECh. 4.1 - Prob. 20ECh. 4.1 - Prob. 21ECh. 4.1 - Prob. 22ECh. 4.1 - Prob. 23ECh. 4.1 - Prob. 24ECh. 4.1 - Prob. 25ECh. 4.1 - Prob. 26ECh. 4.1 - Prob. 27ECh. 4.1 - Prob. 28ECh. 4.1 - Prob. 29ECh. 4.1 - Prob. 30ECh. 4.1 - Prob. 31ECh. 4.1 - Prob. 32ECh. 4.1 - Prob. 33ECh. 4.1 - Prob. 34ECh. 4.1 - Prob. 35ECh. 4.1 - Prob. 36ECh. 4.1 - Prob. 37ECh. 4.1 - Prob. 38ECh. 4.1 - Prob. 39ECh. 4.2 - Prob. 40ECh. 4.2 - Prob. 41ECh. 4.2 - Prob. 42ECh. 4.2 - Prob. 43ECh. 4.2 - Prob. 44ECh. 4.2 - Prob. 45ECh. 4.2 - Prob. 46ECh. 4.2 - Prob. 47ECh. 4.2 - Prob. 48ECh. 4.2 - Prob. 49ECh. 4.2 - Prob. 50ECh. 4.2 - Prob. 51ECh. 4.2 - Prob. 52ECh. 4.2 - Prob. 53ECh. 4.2 - Prob. 54ECh. 4.2 - Exercises 4.55 to 4.58 also refer to Figure 4.16,...Ch. 4.2 - Prob. 56ECh. 4.2 - Prob. 57ECh. 4.2 - Prob. 58ECh. 4.2 - Prob. 59ECh. 4.2 - Prob. 60ECh. 4.2 - Exercises 4.59 to 4.64 give null and alternative...Ch. 4.2 - Prob. 62ECh. 4.2 - Prob. 63ECh. 4.2 - Prob. 64ECh. 4.2 - Finger Tapping and Caffeine The effects of...Ch. 4.2 - Prob. 66ECh. 4.2 - Prob. 67ECh. 4.2 - Prob. 68ECh. 4.2 - Prob. 69ECh. 4.2 - Prob. 70ECh. 4.2 - Prob. 71ECh. 4.2 - Prob. 72ECh. 4.2 - Prob. 73ECh. 4.2 - Prob. 74ECh. 4.2 - Are Antimicrobial Ingredients Having the Opposite...Ch. 4.2 - Prob. 76ECh. 4.2 - Definition of a P-value Using the definition of a...Ch. 4.2 - Rolling Dice You roll a die 60 times and record...Ch. 4.2 - Prob. 79ECh. 4.3 - Prob. 80ECh. 4.3 - Prob. 81ECh. 4.3 - Prob. 82ECh. 4.3 - Prob. 83ECh. 4.3 - Prob. 84ECh. 4.3 - Prob. 85ECh. 4.3 - Prob. 86ECh. 4.3 - Prob. 87ECh. 4.3 - Prob. 88ECh. 4.3 - Prob. 89ECh. 4.3 - Prob. 90ECh. 4.3 - Prob. 91ECh. 4.3 - Prob. 92ECh. 4.3 - Prob. 93ECh. 4.3 - Prob. 94ECh. 4.3 - Prob. 95ECh. 4.3 - Prob. 96ECh. 4.3 - Prob. 97ECh. 4.3 - Prob. 98ECh. 4.3 - Prob. 99ECh. 4.3 - Exercise 1.21 on page 15 introduces a study...Ch. 4.3 - Prob. 101ECh. 4.3 - Prob. 102ECh. 4.3 - Prob. 104ECh. 4.3 - Prob. 105ECh. 4.3 - Prob. 106ECh. 4.3 - Prob. 107ECh. 4.3 - Beer and Mosquitoes Does consuming beer attract...Ch. 4.3 - Prob. 109ECh. 4.3 - Prob. 110ECh. 4.3 - Prob. 111ECh. 4.3 - Prob. 112ECh. 4.3 - Prob. 113ECh. 4.3 - Prob. 114ECh. 4.3 - Prob. 115ECh. 4.3 - Prob. 116ECh. 4.3 - Prob. 117ECh. 4.3 - Prob. 118ECh. 4.4 - Prob. 119ECh. 4.4 - Prob. 120ECh. 4.4 - Prob. 121ECh. 4.4 - Prob. 122ECh. 4.4 - Prob. 123ECh. 4.4 - Prob. 124ECh. 4.4 - Prob. 125ECh. 4.4 - Prob. 126ECh. 4.4 - Prob. 127ECh. 4.4 - Prob. 128ECh. 4.4 - Prob. 129ECh. 4.4 - Prob. 130ECh. 4.4 - Prob. 131ECh. 4.4 - Prob. 132ECh. 4.4 - Prob. 133ECh. 4.4 - Prob. 134ECh. 4.4 - Prob. 135ECh. 4.4 - Prob. 136ECh. 4.4 - Prob. 137ECh. 4.4 - Prob. 138ECh. 4.4 - Prob. 139ECh. 4.4 - Prob. 140ECh. 4.4 - Prob. 141ECh. 4.4 - Prob. 142ECh. 4.4 - Prob. 143ECh. 4.4 - Prob. 144ECh. 4.4 - Prob. 145ECh. 4.4 - Prob. 146ECh. 4.4 - Prob. 147ECh. 4.4 - Prob. 148ECh. 4.4 - Eating Breakfast Cereal and Conceiving Boys...Ch. 4.4 - Prob. 150ECh. 4.4 - Prob. 151ECh. 4.4 - Prob. 152ECh. 4.4 - Prob. 153ECh. 4.4 - Prob. 154ECh. 4.5 - Prob. 155ECh. 4.5 - Prob. 156ECh. 4.5 - Prob. 157ECh. 4.5 - Prob. 158ECh. 4.5 - Prob. 159ECh. 4.5 - Prob. 160ECh. 4.5 - Prob. 161ECh. 4.5 - Prob. 162ECh. 4.5 - Prob. 163ECh. 4.5 - Prob. 164ECh. 4.5 - Prob. 165ECh. 4.5 - Prob. 166ECh. 4.5 - Prob. 167ECh. 4.5 - Testing for a Gender Difference in Compassionate...Ch. 4.5 - Prob. 169ECh. 4.5 - Prob. 170ECh. 4.5 - Prob. 171ECh. 4.5 - Prob. 172ECh. 4.5 - Prob. 173ECh. 4.5 - Prob. 174ECh. 4.5 - Prob. 175ECh. 4.5 - Effect of Sleep and Caffeine on Memory Exercise...Ch. 4.5 - Prob. 177ECh. 4.5 - Prob. 178ECh. 4.5 - Prob. 179ECh. 4.5 - Prob. 180ECh. 4.5 - Prob. 181ECh. 4.5 - Prob. 182ECh. 4.5 - Prob. 183ECh. 4.5 - Prob. 184ECh. 4.5 - Prob. 185ECh. 4.5 - Prob. 186ECh. 4.5 - Prob. 187E
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