Exam #3 Review

Scheduling Information:

 Time: Wednesday, April 22.
Location: Gradescope.
Review Session: Monday, April 20, from 8:00-9:30 in Zoom: https://cmu.zoom.us/j/96154876833
 

Reading:

 Chapter 3, Sections 7-9; Chapter 4; Chapter 5, Section 1-3.

 

Exercises:

 Chapter 3: 4, 6, 7, 10, 16, 25, 28, 30.
Chapter 4: #1, 3, 12, 13, 14.
Chapter 5: #1, 5, 6, 8, 13, 18.

Answers (some anyway):

Chapter 3:
4. C_0 = $121.05
7. alpha = 0.09998881710
11. (a) n/a, (b) [dD(tau)+S_0-KD(T)]^+ <= C_0 <= S_0, (c) [(1-alpha)S_0-KD(T)]^+ <= C_0 <= S_0.
(14) n/a. 16. (1) n/a. (2) P_0 <= alpha P^1_0 + (1-alpha)P^2_0.

Chapter 4:
3. (1) not independant, (2) independant.
12. E[X]=244, Var(X)=3900.
13. P[A] = .02

Chapter 5:
1. (a) p~ = 5/12, q~ = 7/12; (b) P_0= $13.89
5. (1) p~ = 5/8, q~ = 3/8; (2) V_0 = $22.33, Delta = 2/3.
8. (1) alpha = 3/4, (2) Delta = 1/3.
(13) a) not arbitarge-free, b) arbitrage-free and complete, c) arbitrage-free but not complete;

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Old Exam Problems:

Here is a collection of exam problems I've given to students in previous semesters.

Before the questions come in - no, I don't have solutions available for these problems. You have a large number of problems from the text with answers, and it's important for you to get used to working on problems where the answers are not available. You'll have a chance to ask questions at the Review Session, and during your TA's office hours, too.