24/07/2018 Probability and Stochastics for finance - - Unit 5 - Week 4

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Unit 5 - Week 4

Course
outline Assignment 4
The due date for submitting this assignment has passed. Due on 2016-02-16, 23:55 IST.
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portal Submitted assignment

Week 1
1) I f  W (t) t≥0  is a Brownian M otion then 3 points
Week 2

Week 3
dW (t)dW (t) = 1
Week 4

Ito Integral In
Higher dW (t)dW (t) = 0

Dimension

Application to Ito
Integral I dW (t)dW (t) = dt

Application to Ito
Integral II
N one of  these
Black Scholes
Formula I No, the answer is incorrect.
Score: 0
Black Scholes
Formula II Accepted Answers:
Quiz :
dW (t)dW (t) = dt
Assignment 4

2) 3 points
Assignment
t t t t
Solutions 2 2
I f  Y (t) = Y (0) + ∫ θ 2 (u)du + ∫ σ 21 (u)dW1 (u) + ∫ σ 22 (u)dW2 (u).   T hen [Y , Y ](t) = ∫ (σ (u) + σ (u))
21 22
0 0 0 0

True
False

No, the answer is incorrect.

Score: 0
Accepted Answers:
True

3) 3 points
I f  I (t) is an I to integral with simple process Δ(t) then

E(I (t)) = t , ∀ t ≥ 0

E(I (t)) = 0 , ∀ t ≥ 0

E(I (t)) = Δ(t) , ∀ t ≥ 0

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24/07/2018 Probability and Stochastics for finance - - Unit 5 - Week 4

2
E(I (t)) = Δ (t) , ∀ t ≥ 0

No, the answer is incorrect.

Score: 0
Accepted Answers:

E(I (t)) = 0 , ∀ t ≥ 0

4) 3 points
T he Black − Scholes − M eston partial dif f erential equation is

1 2 2
ct (t, x) + rxcx(t, x) + σ x cxx (t, x) = rc(t, x),  ∀ t ∈ [0, T ),  x ≥ 0
2

1 2 2
ctt (t, x) + rxcx(t, x) + σ x cxx (t, x) = rc(t, x),  ∀ t ∈ [0, T ),  x ≥ 0
2

1 2 2
ct (t, x) + rxcx(t, x) + σ x ctt (t, x) = rc(t, x),  ∀ t ∈ [0, T ),  x ≥ 0
2

none of  these

No, the answer is incorrect.

Score: 0
Accepted Answers:

1 2 2
ct (t, x) + rxcx(t, x) + σ x cxx (t, x) = rc(t, x),  ∀ t ∈ [0, T ),  x ≥ 0
2

5) 3 points
Let X (t) and Y (t) be I to process,  then

d(X (t)Y (t)) = X (t)dY (t) + Y (t)dX (t)

d(X (t)Y (t)) = dX (t)dY (t)

d(X (t)Y (t)) = X (t)dY (t) + Y (t)dX (t) + dX (t)dY (t)

d(X (t)Y (t)) = X (t)dY (t) + Y (t)dX (t) − dX (t)dY (t)

No, the answer is incorrect.

Score: 0
Accepted Answers:

d(X (t)Y (t)) = X (t)dY (t) + Y (t)dX (t) + dX (t)dY (t)

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24/07/2018 Probability and Stochastics for finance - - Unit 5 - Week 4

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