# Question

You drawthese five numbers from a standard normal distribution: {−1.7, 0.55, −0.3, −0.02, .85}. What are the equivalent draws from a normal distribution with mean 0.8 and variance 25?

## Answer to relevant Questions

Suppose x1∼ N(1, 5) and x2 ∼ N(−2, 2). The covariance between x1 and x2 is 1.3. What is the distribution of x1+ x2? What is the distribution of x1− x2? What is Pr(St > $105) for t = 1? Howdoes this probability change when you changet? How does it change when you change σ? Repeat the previous problem, only assume that the options trader purchases 1000 1-year at-the-money straddles. Suppose S0 = 100, r = 0.06, σS = 0.4 and δ = 0. Use Monte Carlo to compute prices for claims that pay the following: a. S21 b.√S1 c. S1-2 Assume that one stock follows the process dS/S = αdt + σdZ (20.44) Another stock follows the process dQ/Q = αQdt + σdZ + dq1+ dq2 (20.45) a. If there were no jump terms (i.e., λ1 = λ2 = 0), what would be the relation ...Post your question

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