Solutions of Selected Problems from Probability Essentials, Second Edition
Solutions to selected problems of Chapter 2 2.1 Let's first prove by induction that #(2n ) = 2n if = cfw_x1 , . . . , xn . Fo
Printed April 10, 2009
Exercise on Probability Essentials
By Author. Jean Jacod, Philip Protter
Byoung jin Choi e-mail: choibj@chungbuk.ac.kr
Abstract In this book we solve a exercise of the Probabili
Printed April 16, 2009
Exercise on Probability Essentials
By Author. Jean Jacod, Philip Protter
Byoung jin Choi e-mail: choibj@chungbuk.ac.kr
Abstract In this book we solve a exercise of the Probabili
Chapter 8
Swaps
Question 8.1. We rst solve for the present value of the cost per two barrels: $22 $23 = 41.033. + 1.06 (1.065)2 We then obtain the swap price per barrel by solving: x x = 41.033 + 1.06
Chapter 5
Financial Forwards and Futures
Question 5.1. Four different ways to sell a share of stock that has a price S(0) at time 0. Description Outright Sale Security Sale and Loan Sale Short Prepaid
Chapter 4
Introduction to Risk Management
Question 4.1. The following table summarizes the unhedged and hedged prot calculations: Copper price in Total cost one year $0.70 $0.90 $0.80 $0.90 $0.90 $0.9
Chapter 3
Insurance, Collars, and Other Strategies
Question 3.1. This question is a direct application of the Put-Call-Parity (equation (3.1) of the textbook. Mimicking Table 3.1., we have: S&R Index
Chapter 2
An Introduction to Forwards and Options
Question 2.1. The payoff diagram of the stock is just a graph of the stock price as a function of the stock price:
In order to obtain the prot diagram
Chapter 1
Introduction to Derivatives
Question 1.1. This problem offers different scenarios in which some companies may have an interest to hedge their exposure to temperatures that are detrimental to