ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.3 : (a) In the M / M / 1 queue that happens with randomness, let State 0 = the queue and server are empty, State 1 = the server is in use and the queue is empty, State 2 = the server is in use and 1 is in the queue, State 3 = the server is in use and 2 in the queue. Let P (0) = probability of State 0, P (1) = probability of State 1, P (2) = probability of State 2, P (3) = probability of State 3 and so on. If c = constant, P (1) = c P (0), P (2) = c [ c P (0) ], P (3) = c { c [ c P (0) ] }, write an equation that involves P (N), P (N + 1) and c. (b) Let L = market price of risk, r = riskless rate, m = expected return, s = volatility. Given that L = (m - r) / s related to oil prices, expected return = 12 %, s = 20 %, riskless rate = 8 %, calculate the market price of risk.
Answer Posted / kangchuentat
ACCOUNTING AND FINANCIAL ENGINEERING - ANSWER 34.3 : (a) P (1) = c P (0), P (2) = c [ c P (0) ] = c P (1), P (3) = c { c [ c P (0) ] } = c P (2). Then P (N + 1) = c P (N). (b) Let m = 12 %, r = 8 %, s = 20 %, then L = (m - r) / s = (12 - 8) / 20 = 4 / 20 = 1 / 5. The answer is given by Kang Chuen Tat; PO Box 6263, Dandenong, Victoria VIC 3175, Australia; SMS +61405421706; chuentat@hotmail.com; http://kangchuentat.wordpress.com.
Is This Answer Correct ? | 0 Yes | 0 No |
Post New Answer View All Answers
What are the merits of using a falling film evaporator?
testing formula for oxygen by ammonium chloride,ammonium hydroxide and copper
What is a black body?
Is there a quick rule-of-thumb to estimate a gas side heat-transfer rate inside the tubes of a shell and tube heat exchanger?
what is first order of reaction?
Define a surfactant?
whats the allowed tolerance of pipe to pipe butt joint mismatching
What are the effects of oils on the properties of Polyolefins?
How can you quickly estimate the horsepower of a pump?
What types of metals are typically removed via chemical precipitation?
What effect does choking a vertical thermosiphon have on the heat transfer rate?
What is the maximum permissible Earth to Neutral voltage in an electrical system.
Hi, Please give me chemical engineering paper for IOCL exam for entire written exam, GD and personel interview model questions to my email id. (chemistnathan@rediffmail.com) Rgds, Ragu
What is screen analysis and what are its applications in the chemical industry?
What is the most common cause of solid size segregation in bulk solid systems?