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2. Consider a trader with initial fund given by To = 15, and the transaction cost function of holding q shares of stock i is C(g) = 10 + q*. The price (r.) at which this trader sells its position is stochastically distributed according to the following probability distribution: P(z,) = {0.5, if z, = 88 10.5, if z, = $2 Let a random variable i be the profit of trading at each time t, t = 1,2,...,T, (a) If the trader's utility function is given by u(#) = u(#) – 0(#), %3D

2. Consider a trader with initial fund given by To = 15, and the transaction cost function of holding q shares of stock i is C(g) = 10 + q*. The price (r.) at which this trader sells its position is stochastically distributed according to the following probability distribution: P(z,) = {0.5, if z, = 88 10.5, if z, = $2 Let a random variable i be the profit of trading at each time t, t = 1,2,...,T, (a) If the trader's utility function is given by u(#) = u(#) – 0(#), %3D

College Algebra
College Algebra
7th Edition
ISBN:9781305115545
Author:James Stewart, Lothar Redlin, Saleem Watson
Publisher:James Stewart, Lothar Redlin, Saleem Watson
Chapter9: Counting And Probability
Section9.4: Expected Value
Problem 1E: If a game gives payoffs of $10 and $100 with probabilities 0.9 and 0.1, respectively, then the...
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2. Consider a trader with initial fund given by To = 15, and the transaction cost function of holding q shares of stock i is C(g) = 10 + q. The price (r.) at which this trader sells its position is stochastically distributed according to the following probability distribution: P(z,) = 0.5, if z, = $8 10.5, if z; = $2 Let a random variable ī be the profit of trading at each time t, t = 1,2, ...,T, (a) If the trader's utility function is given by u(주) -M(#) - 능0(㈜), where u(-) is the mean and o(:) is the variance, determine the trader's optimal level of position, and the associated equilibrium profits from liquidate the complete position.
Transcribed Image Text:2. Consider a trader with initial fund given by To = 15, and the transaction cost function of holding q shares of stock i is C(g) = 10 + q. The price (r.) at which this trader sells its position is stochastically distributed according to the following probability distribution: P(z,) = 0.5, if z, = $8 10.5, if z; = $2 Let a random variable ī be the profit of trading at each time t, t = 1,2, ...,T, (a) If the trader's utility function is given by u(주) -M(#) - 능0(㈜), where u(-) is the mean and o(:) is the variance, determine the trader's optimal level of position, and the associated equilibrium profits from liquidate the complete position.
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