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Thread: Question For Dr. Weishaus

  1. #1
    Actuary.com - Level II Poster
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    Question For Dr. Weishaus

    Or anyone else that can answer it...could you please explain the difference in the chi-squared statistic calculated from the following two pieces of information

    assume pass rates are the same across companies

    (Number of Students, Number Passed)
    Company A 20 , 5
    Company B 15 , 9
    Company C 17 , 10


    and this

    (Number Failed , Number Passed)
    Company A 15 , 5
    Company B 6 , 9
    Company C 7 , 10

  2. #2
    Author, Instructor and Seminar Provider
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    There should be no difference if you do them correctly.

  3. #3
    Actuary.com - Level I Poster
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    Dr. Weishaus I'm facing a little of confusion in chapter 7 (6th edition). I'm confusing between :
    "The expected payoff of an option" AND "the expected payoff of an option, given that it pays off" OR "the conditional expected payoff".
    In the exercises of chapter 7, you were calculating the expected payoff of an option as the partial expectation which is
    E[max(0, S-K)]= S(0)e^(drift).N(d1)-K.N(d2), but in the practice exams there are many problems where you calculated the expected payoff as the conditional expectation. In praxtice exam 10, page 541, #16, we're asked to calculate the expected payoff of the call option, the answer is calculated as the conditional expected payoff, and also I didn't understand why you just put X(0).N(d1)/N(d2)- K , why we don't multiply X(0) by the lognormal random variable power the drift ?
    Last edited by cynthia edde; October 15th 2009 at 11:41 AM.

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