Homework Answers
There are 26 possible letters
So n=26
Such that there is one option
m=1
Then the probability of M/N=1/26
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find the probability that a european put option with underlying s finishes in the money a) Let Y e*t, Find the stochastic differential equation satisfied by t. b) Let Zt -eatX. Find the...
PROBLEM 2. [5 points] Let X(t) be a Brownian motion. Assume that the stock price follows the stoc...
PROBLEM 2. [5 points] Let X(t) be a Brownian motion. Assume that the stock price follows the stochastic differential equation dS ơSdX+1Sdt. what stochastic differential equation does the stochastic process (a) Y 25, (b) Y = S (c) Y-es, (d) YeT-/S follow? In each cases express the coefficients of dX and dt in terms of Y rather than S. Use Ito's lemma
PROBLEM 2. [5 points] Let X(t) be a Brownian motion. Assume that the stock price follows the stochastic...
2. Solving the generalized geometric Brownian motion equation. Let S(t) be a positive stochastic process that...
2. Solving the generalized geometric Brownian motion equation. Let S(t) be a positive stochastic process that satisfies the generalized geometric Brownian motion SDE dS(t) = u(t)S(t) dt + o(t)S(t) dW(t), where u(t) and o(t) are processes adapted to the filtration Ft, t > 0. (a) Use Itô’s lemma to compute d log S(t). Simplify so that you have a formula for d log S(t) that does not involve S(t). (b) Integrate the formula you obtained in (a), and then exponentiate...
1 point) Let a and b be constants, and let Let f(t,) . Then f is...
1 point) Let a and b be constants, and let Let f(t,) . Then f is a smooth function of variables t and z, and frz Let z-W be a Wiener process. The goal is apply Ito's lemma in the form, to find a stochastic differential equation that is satisfied by Y = f(t, z) After applying Ito's lemma, dt t dz Type z Wt as z. Since Y e is a common factor on the right side, after dividing...
Q3. Let Grepresent a system described by the following differential equation: diye) + y(t) = dre)...
Q3. Let Grepresent a system described by the following differential equation: diye) + y(t) = dre) - 10) where x(1) is the input signal and y(t) is the output signal. a. (15 points) Determine the output yı(t) of G when the input is x below: 0 0 : otherwise b. (10 points) Consider a feedback loop that contains the system G, as shown below: Find a differential equation that relates w(l) to yo) when K = 10. Your differential equation...
3. Consider the differential equation ty" - (t+1)y + y = t?e?', t>0. (a) Find a...
3. Consider the differential equation ty" - (t+1)y + y = t?e?', t>0. (a) Find a value ofr for which y = et is a solution to the corresponding homogeneous differential equation. (b) Use Reduction of Order to find a second, linearly independent, solution to the correspond- ing homogeneous differential equation. (c) Use Variation of Parameters to find a particular solution to the nonhomogeneous differ- ential equation and then give the general solution to the differential equation.
Question 1 Consider the derivation of the Black-Scholes model of option pricing. Let S=S(t) be the...
Question 1 Consider the derivation of the Black-Scholes model of option pricing. Let S=S(t) be the underlying stock price at time t and let f=f(S, t) be the option price at time t. a) Write down the value P of the portfolio defined in the Black-Scholes model. [2 marks] b) Use Itô’s lemma to find an expression for the change Δf in the discrete time Δt. [5 marks] c) Use the expression you have found in point b) to find...
Consider the differential equation y" – 7 ý + 12 y = 3 e21. (a) Find...
Consider the differential equation y" – 7 ý + 12 y = 3 e21. (a) Find r1, r2, roots of the characteristic polynomial of the equation above. W r1, r2 = 3,4 (b) Find a set of real-valued fundamental solutions to the homogeneous differential equation corresponding to the one above. yı(t) = e^(3t) M y2(t) = e^(41) (c) Find a particular solution Yp of the differential equation above. M yp(t) = Note: You can earn partial credit on this problem.
Consider the differential equation e24 y" – 4y +4y= t> 0. t2 (a) Find T1, T2,...
Consider the differential equation e24 y" – 4y +4y= t> 0. t2 (a) Find T1, T2, roots of the characteristic polynomial of the equation above. 11,12 M (b) Find a set of real-valued fundamental solutions to the homogeneous differential equation corresponding to the one above. yı(t) M y2(t) = M (C) Find the Wronskian of the fundamental solutions you found in part (b). W(t) M (d) Use the fundamental solutions you found in (b) to find functions ui and Usuch...
7. Consider the differential equation (a) Show that z 0 is a regular singular point of the above differential equation (b) Let y(x) be a solution of the differential equation, where r R and the s...
7. Consider the differential equation (a) Show that z 0 is a regular singular point of the above differential equation (b) Let y(x) be a solution of the differential equation, where r R and the series converges for any E (-8,s), s > 0 Substitute the series solution y in to the differential equation and simplify the terms to obtain an expression of the form 1-1 where f(r) is a polynomial of degree 2. (c) Determine the values of r....
Given the following differential equation (a) Find the forced response y(t) to a unit ramp input of u(t). (9%) (Medium) (b) Find the steady-state response y(t) subject to ut) 3cos(0.5t -0.5). (Hi...
Given the following differential equation (a) Find the forced response y(t) to a unit ramp input of u(t). (9%) (Medium) (b) Find the steady-state response y(t) subject to ut) 3cos(0.5t -0.5). (Hint: use the frequency response formula.) (996) (Easy)
Given the following differential equation (a) Find the forced response y(t) to a unit ramp input of u(t). (9%) (Medium) (b) Find the steady-state response y(t) subject to ut) 3cos(0.5t -0.5). (Hint: use the frequency response formula.) (996) (Easy)
PROBLEM 2. [5 points] Let X(t) be a Brownian motion. Assume that the stock price follows the stochastic differential equation dS ơSdX+1Sdt. what stochastic differential equation does the stochastic process (a) Y 25, (b) Y = S (c) Y-es, (d) YeT-/S follow? In each cases express the coefficients of dX and dt in terms of Y rather than S. Use Ito's lemma
PROBLEM 2. [5 points] Let X(t) be a Brownian motion. Assume that the stock price follows the stochastic...
2. Solving the generalized geometric Brownian motion equation. Let S(t) be a positive stochastic process that satisfies the generalized geometric Brownian motion SDE dS(t) = u(t)S(t) dt + o(t)S(t) dW(t), where u(t) and o(t) are processes adapted to the filtration Ft, t > 0. (a) Use Itô’s lemma to compute d log S(t). Simplify so that you have a formula for d log S(t) that does not involve S(t). (b) Integrate the formula you obtained in (a), and then exponentiate...
1 point) Let a and b be constants, and let Let f(t,) . Then f is a smooth function of variables t and z, and frz Let z-W be a Wiener process. The goal is apply Ito's lemma in the form, to find a stochastic differential equation that is satisfied by Y = f(t, z) After applying Ito's lemma, dt t dz Type z Wt as z. Since Y e is a common factor on the right side, after dividing...
Q3. Let Grepresent a system described by the following differential equation: diye) + y(t) = dre) - 10) where x(1) is the input signal and y(t) is the output signal. a. (15 points) Determine the output yı(t) of G when the input is x below: 0 0 : otherwise b. (10 points) Consider a feedback loop that contains the system G, as shown below: Find a differential equation that relates w(l) to yo) when K = 10. Your differential equation...
3. Consider the differential equation ty" - (t+1)y + y = t?e?', t>0. (a) Find a value ofr for which y = et is a solution to the corresponding homogeneous differential equation. (b) Use Reduction of Order to find a second, linearly independent, solution to the correspond- ing homogeneous differential equation. (c) Use Variation of Parameters to find a particular solution to the nonhomogeneous differ- ential equation and then give the general solution to the differential equation.
Consider the differential equation y" – 7 ý + 12 y = 3 e21. (a) Find r1, r2, roots of the characteristic polynomial of the equation above. W r1, r2 = 3,4 (b) Find a set of real-valued fundamental solutions to the homogeneous differential equation corresponding to the one above. yı(t) = e^(3t) M y2(t) = e^(41) (c) Find a particular solution Yp of the differential equation above. M yp(t) = Note: You can earn partial credit on this problem.
Consider the differential equation e24 y" – 4y +4y= t> 0. t2 (a) Find T1, T2, roots of the characteristic polynomial of the equation above. 11,12 M (b) Find a set of real-valued fundamental solutions to the homogeneous differential equation corresponding to the one above. yı(t) M y2(t) = M (C) Find the Wronskian of the fundamental solutions you found in part (b). W(t) M (d) Use the fundamental solutions you found in (b) to find functions ui and Usuch...
7. Consider the differential equation (a) Show that z 0 is a regular singular point of the above differential equation (b) Let y(x) be a solution of the differential equation, where r R and the series converges for any E (-8,s), s > 0 Substitute the series solution y in to the differential equation and simplify the terms to obtain an expression of the form 1-1 where f(r) is a polynomial of degree 2. (c) Determine the values of r....
Given the following differential equation (a) Find the forced response y(t) to a unit ramp input of u(t). (9%) (Medium) (b) Find the steady-state response y(t) subject to ut) 3cos(0.5t -0.5). (Hint: use the frequency response formula.) (996) (Easy)
Given the following differential equation (a) Find the forced response y(t) to a unit ramp input of u(t). (9%) (Medium) (b) Find the steady-state response y(t) subject to ut) 3cos(0.5t -0.5). (Hint: use the frequency response formula.) (996) (Easy)
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