(a) The tree d on the tree. P(AC) PLAD) = the 15 missing probabilities so that...
Question 1 A Markov process has two states A and B with transition graph below. a) Write in the two missing probabilities. (b) Suppose the system is in state A initially. Use a tree diagram to find the probability B) 0.7 0.2 A that the system wil be in state B after three steps. (c) The transition matrix for this process is T- (d) Use T to recalculate the probability found in (b.
Question 1 A Markov process has two...
Question 13 (1 point) Suppose SO = 100 and stock tree is below, rf=0, p=0.45 t=0 t=1 t=2 110.25 105.0 100.0 100.0 95.3 90.7 b) Compute payoffs for a call (with $105 strike, expires t=2) if S-100 at t-2? 0 1 0-5 Question 14 (1 point) Suppose SO = 100 and stock tree is below, rf=0 (risk free rate), p=0.45 (risk-neutral probability). Call option with strike 105. t=0 t=1 t=2 110.25 105.0 100.0 95.3 90.7 100.0 c) Compute C_u (call...
1.1. Suppose that you have a stock in the one-period binomial model with fixed u, d, and r such that 0< d< 1 +r < u. Suppose that there are positive numbers pi and such that pi, qi < 1, pi + q-1, and (1 + r)So = PiSi (H) + qi Si (T). Show that pi = p ad qi = q. Hint: You know that the risk-neutral probabilities satisfy these equations as well.
Solve for the following probabilities (ranges of X values): a. P(X ≤ 7) when m = 15 b. P(9 ≤ X ≤ 18) when m = 15 c. P(X ≥ 15) when m = 15 d. P(12 ≤ X < 20) when m = 15 (1) Solve the probabilities on the PROB worksheet. (To four decimal places) The P(X ≤7) when the poisson mean = 15 is ________.Assume a poisson distribution (2) Solve the probabilities on the PROB worksheet. (To four decimal places) The...
hi, my answers seemed strange after using Bayes theorem, so I am
unsure if I made the right calculations. Please show your work so I
can catch my error :)
Extra Credit: ELISA tests are used to screen donated blood for the presence of the AIDS virus. The test actually detects antibodies, substances that the body produces when the virus is present. When antibodies are present, ELISA is positive with probability about 0.997 and negative with probability about 0.003. When...
According to the law of total probability the event space is partitioned into a disjoint set of hypotheses. As a result, the evidence is also split across these hypotheses. Going back to our example, the space of people who Like Burger King is actually part of a bigger space consisting of people who Like Burger King and Do Not Like Burger King. In fact, if you look at our table you see both columns. Given this idea, the denominator for...
Background The notation P(AlB) is read as "the probability of A,
given B, has occurred." So the "" symbol is read as "given."
Formally, A and B are called events and P(AB) is a conditional
probability Bayes' rule is a very useful way of relating
conditional and unconditional probabilities. According to this
rule, for any two events A and B, we have: P(B) Let's use "T+" to
denote the event "the screening test concludes that the condition
(disease, pregnancy, etc,)...
2. Consider a two-period (T = 2) binomial model with initial stock price So = $8, u= 2, d=1/2, and “real world” up probability p=1/3. (a) Draw the binary tree illustrating the possible paths followed by the stock price process. (b) The sample space for this problem can be listed as N = {dd, jdu, ud, uu}. List the probabilities associated with the individual elements of the sample space 12. (c) List the events (i.e., the subsets of N2) making...
Probability theory question, please help solve in full so I can
understand as well. Thank you!! (will give positive rating)
A box contains 15 resistors, 6 diodes, and 9 capacitors. 1. 2 parts are taken from the box. Consider the following events: A) the first part is resistor B) the first part is diode C) the first part is capacitor Find the following probabilities a) p(A)-? g) p(E/A)=? h) p(E/B)=? D) the second part is resistor E) the second part...
Please explain part 3 well. what was done to get probability
of male ? explain clearly and fully please
Test - Summer 2015 - Question 1 C UTSC) the Search Caps (UTS The sho w Se for the follow PUTSCM) t he PUT P UTS PUTSCH PCUMAF) = f(b) f(F )-3306)- 0.18 AVTSGAM) = ) ) - (0.5 ) - 0225 PLUSCAM) RUSCO PUMILSO) -(0.2)60.3-0.06 PLUSCAF) - (Usc) A Flu )-(02)(0%) 0.14 2. Solve for the following condition probabilities: PUTM...