FINM345A09Homework7

# FINM345A09Homework7 - FINM345/STAT390 Stochastic Calculus...

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FINM345/STAT390 Stochastic Calculus Hanson Autumn 2009 Lecture 7 Homework (HW7): Compound-Jump-Diffusion Distributions, Black-Sholes & Merton Option Pricing (Due by Lecture 8 in Chalk FINM345 Assignment Submenu) { Note: Dropped the Digital Dropbox } You must show your work, code and/or worksheet for full credit. There are 10 points per question if correct answer and negative points for missing homework sets. Corrections are in Red as are comments, November 11, 2009 1. Construct the MATLAB (or other reasonable code) for simulating the Normal-Uniform Hybrid Mark random variables discussed on L6-p2 & L6-p3. (a) Present the simulation results in a histogram with a reasonable bin size. Let the simulation sample size be N = 5e+3. Use the sample parameters, a = - 0 . 0947, b = +0 . 1096, μ n = 2 . 448e-4, σ n = 1 . 121e-2 and p u = 0 . 60. (b) Also, compute and report the simulated mean, standard deviation, coefficient of skewness and coefficient of kurtosis. { Hint: For the truncated normal part of the hybrid distribution, you will need to simu-

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