### Develop a formula for the price of a call option

Assignment Help Engineering Mathematics
##### Reference no: EM131168892

Let an asset follow a Brownian motion

dS = μdt + σdW,

with µ and a constant. The constant interest rate is r. What process does S follow in the risk-neutral measure? Develop a formula for the price of a call option and for the price of a digital call option. What is the analogue of the Black-Scholes equation for this asset?

### Write a Review

#### Types of integer programming models

1. The 3 types of integer programming models are total, 0 - 1, and mixed. 2. In a mixed integer model, all decision variables have integer solution values.

#### Confidence interval be narrower or wider

Prepare a 95% confidence interval for the average grocery bill. Would a 99% confidence interval be narrower or wider than the 95% confidence interval?

#### What would the rating be for a quake

The Richter scale is a logarithmic scale, with an increase of one on the scale corresponding to a ten-times increase in the intensity of the earthquake. What would the rating be for a quake that was 10 times as intense as A? What would the rating b..

#### The estimated regression coefficients related issues

Based on the estimated regression equation in Question Two and the calculated SSE, MSE & SE, does a statistically significant (.05 level) relationship exist between the number of days absent and the distance to work?

#### Find the components of the tensors

Find the components of the tensors F, C, B, f' and 11 for the deformation xl= a,(Xi+ aX2),  X2 = a2X2,  X3 = a3X3

#### Problem regarding the linear programming-max cover

DixieNet is an Internet service provider for residential customers in a southern state. The company is small now but plans to expand. Its first major goal is to establish a set of hubs throughout the state so that all residents of the state can ac..

#### Typical recommendation from an inferential test

A typical recommendation from an inferential test is to either not Reject the null implying no statistical difference in the means or to reject implying there is a statistical difference in the means.

#### Write the second order ode as a system of first order odes

Consider the differential equation for mass-spring-damper system as shown: d2x/dt2 + 2γ(dx/dt) + k2x = 0. Write the second order ODE as a system of first order ODEs

#### Decision variable-objective function and constraints

What are the decision variable, objective function and constraints. Mathematically formulate a linear optimization model.

#### Optimization problem using excel add-in solver

This problem requires the use of Excel and the add-in, called Solver.  The course is Excel-based and Solver is the optimization application used for all problems.

#### Information system for project monitoring and reporting

1. Why can't the PM use the organization's current information system for project monitoring and reporting? 2. What does it mean to say that project monitoring and control are on the opposite sides of project selection and planning?

#### Minimum cost and associated routing to ship

The costs to transport goods between outlets is listed below. What is the minimum cost and associated routing to ship from A to B and E on the same delivery run?