Question

One of your best friends is working as a stock market trader. He/She buys 100 shares of stock A and 200 shares of stock B. Given his/her great experience and connections he/she knows how can change the prices of A and B, over a certain time period.

He/She told you: Let X and Y be the price changes of A and B, respectively, over a certain time period, and assume that the joint PMF of X and Y is uniform over the set of integers x and y satisfying, the following conditions:

− 2 ≤ x ≤ 4

and

−1 ≤ y − x ≤ 1

He/She realizes that you know about stochastic modeling and asks for your help. He/She is very interested in three things:

a) the marginal PMFs of X and Y

b) the expected values (means) of X and Y and obviously,

c) his/her expected profit.

Answer 1

thank you

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