A boundary element method to price time-dependent double barrier options

In this paper we propose a new method for pricing double-barrier options with moving barriers under the Black-Scholes and the CEV models. First of all, by applying a variational technique typical of the boundary element method, we derive an integral representation of the double-barrier option price in which two of the integrand functions are not given explicitly but must be obtained solving a system of Volterra integral equations of the first kind. Second, we develop an ad hoc numerical method to regularize and solve the system of integral equations obtained. Several numerical experiments are carried out showing that the overall algorithm is extraordinarily fast and accurate, even if the barriers are not differentiable functions. Moreover the numerical method presented in this paper performs significantly better than the finite difference approach.     

A parallel version of the preconditioned conjugate gradient method for boundary element equations

The parallel version of precondition techniques is developed for matrices arising from the Galerkin boundary element method for two-dimensional domains with Dirichlet boundary conditions. Results were obtained for implementations on a transputer network as well as on an nCUBE-2 parallel computer showing that iterative solution methods are very well suited for a MIMD computer. A comparison of numerical results for iterative and direct solution methods is presented and underlines the superiority of iterative methods for large systems.     

Dynamic analysis of plane elasticity with new complex Fourier radial basis functions in the dual reciprocity boundary element method

In this paper, dual reciprocity (DR) boundary element method (BEM) is reformulated using new radial basis function (RBF) to approximate the inhomogeneous term of Navier’s differential equation (i.e., inertia term). This new RBF, which is in the form of exp(iωr), is called complex Fourier RBF hereafter. The present RBF has simultaneously collected the properties of Gaussian and real Fourier RBF reported in literature together. Consequently, this promising feature has provided more robustness and potency of the proposed method. The required kernels for displacement and traction particular solutions are derived by employing the method of variation of parameters. As some terms of these kernels are singular, a new simple smoothing trick is employed to resolve the singularity problem. Moreover, the limiting values of relevant kernels are evaluated. The validity, accuracy, and strength of the present formulation are illustrated throughout several numerical examples. The numerical results show that the proposed complex Fourier RBF represents more accurate solutions, using less degree of freedom compared to other RBFs available in the literature.     

Approximation of boundary values in the boundary element method

Various techniques may be applied to the approximation of the unknown boundary functions involved in the boundary element method (BEM). Several techniques have been examined numerically to find the most efficient. Techniques considered were: Lagrangian polynomials of the zeroth, first and second orders; spline functions; and the novel weighted minimization technique used successfully in the finite difference method (FDM) for arbitrarily irregular meshes. All these approaches have been used in the BEM for the numerical analysis of plates with various boundary conditions.Both coarse and fine grids on the boundary have been assumed. Maximal errors of the deflections of each plate and the bending moments have been found and the effective computer CPU times determined.Analysis of the results showed that, for the same computer time, the greatest accuracy was obtained by the weighted FDM approach. In the case of the Lagrange approximation, higher order polynomials have proved more efficient. The spline technique yielded more accurate results, but with a higher CPU time.Two discretization approaches have been investigated: the least-squares technique and the collocation method. Despite the fact that the simultaneous algebraic equations obtained were not symmetric, the collocation approach has been confirmed as clearly superior to the least-squares technique, because of the amount of computation time used.     

An alternative formulation of the boundary element method

The paper suggests an alternative formulation of the Boundary Element Method, in which singular solutions generated by unit dislocations are required and moreover the stresses at the interior points of the body are directly computed from the boundary quantities, without passing through the displacements. Relationships between the singular solutions for unit dislocation and unit force are derived.     

The boundary element method with Lagrangian multipliers

On open surfaces, the energy space of hypersingular operators is a fractional order Sobolev space of order 1/2 with homogeneous Dirichlet boundary condition (along the boundary curve of the surface) in a weak sense. We introduce a boundary element Galerkin method where this boundary condition is incorporated via the use of a Lagrangian multiplier. We prove the quasi‐optimal convergence of this method (it is slightly inferior to the standard conforming method) and underline the theory by a numerical experiment. The approach presented in this article is not meant to be a competitive alternative to the conforming method but rather the basis for nonconforming techniques like the mortar method, to be developed. © 2008 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq, 2009     

The versions of the finite element method for problems with boundary layers

We study the uniform approximation of boundary layer functions for , , by the and versions of the finite element method. For the version (with fixed mesh), we prove super-exponential convergence in the range . We also establish, for this version, an overall convergence rate of in the energy norm error which is uniform in , and show that this rate is sharp (up to the term) when robust estimates uniform in are considered. For the version with variable mesh (i.e., the version), we show that exponential convergence, uniform in , is achieved by taking the first element at the boundary layer to be of size . Numerical experiments for a model elliptic singular perturbation problem show good agreement with our convergence estimates, even when few degrees of freedom are used and when is as small as, e.g., . They also illustrate the superiority of the approach over other methods, including a low-order version with optimal ``exponential" mesh refinement. The estimates established in this paper are also applicable in the context of corresponding spectral element methods.

     

On the coupling of regularization techniques and the boundary element method for a hemivariational inequality modelling a delamination problem

In this paper, we couple regularization techniques of nondifferentiable optimization with the h‐version of the boundary element method (h‐BEM) to solve nonsmooth variational problems arising in contact mechanics. As a model example, we consider the delamination problem. The variational formulation of this problem leads to a hemivariational inequality with a nonsmooth functional defined on the contact boundary. This problem is first regularized and then discretized by an h‐BEM. We prove convergence of the h‐BEM Galerkin solution of the regularized problem in the energy norm, provide an a priori error estimate and give a numerical examples. Copyright © 2016 John Wiley & Sons, Ltd.     

Solution of some plate bending problems using the boundary element method

Some fundamental aspects of the boundary element method of the Kirchhoff theory of thin plate flexure are given. The direct boundary integral equation method with higher conforming properties (using first-order Hermitian interpolation for plate displacement ω, and zero-order Hermitian interpolation for angle of rotation θ, the moment M andthe equivalent shear V) are used for several computational examples. They are: square plate with simply-supported or clamped edges, the same square plate with square central opening and the cantilevered triangular plates. The results of computation as compared with some known experimental and theoritical results showed that the numerical schemes seemed to be satisfactory for the practical applications.     

Analysis of the stress singularity for a bi-material V-notch by the boundary element method

A new algorithm coupling the boundary element technique with the characteristic expansion method is proposed for the computation of the singular stress field in the V-notched bi-material structure. After the stress asymptotic expansions are introduced into the linear elasticity equilibrium equations, the governing equations at the small sector dug out from the bi-material V-notch tip region are transformed into the ordinary differential eigen-equations. All the parameters in the asymptotic expansions except the combination coefficients can be achieved by solving the established eigen-equations with the interpolating matrix method. Furthermore, the conventional boundary element method is applied to modeling the remaining structure without the notch tip region. The combination coefficients in the asymptotic expansion forms can be computed by the discretized boundary integral equations. Thus, the singular stress field at the V-notch tip and the generalized stress intensity factors of the bi-material notch are successfully calculated. The accurate singular stress field obtained here is very useful in the evaluation of the fracture property and the fatigue life of the V-notched bi-material structure.     

Three-dimensional simulation of flat rolling through a combined finite element–boundary element approach

This paper presents an innovative approach for analysing three-dimensional flat rolling. The proposed approach is based on a solution resulting from the combination of the finite element method with the boundary element method. The finite element method is used to perform the rigid–plastic numerical modelling of the workpiece allowing the estimation of the roll separating force, rolling torque and contact pressure along the surface of the rolls. The boundary element method is applied for computing the elastic deformation of the rolls. The combination of the two numerical methods is made using the finite element solution of the contact pressure along the surface of the rolls to define the boundary conditions to be applied on the elastic analysis of the rolls. The validity of the proposed approach is discussed by comparing the theoretical predictions with experimental data found in the literature.     

A Galerkin boundary element method based on interpolatory Hermite trigonometric wavelets

A Galerkin boundary element method based on interpolatory Hermite trigonometric wavelets is presented for solving 2-D potential problems defined inside or outside of a circular boundary in this paper. In this approach, an equivalent variational form of the corresponding boundary integral equation for the potential problem is used; the trigonometric wavelets are employed as trial and test functions of the variational formulation. The analytical formulae of the matrix entries indicate that most of the matrix entries are naturally zero without any truncation technique and the system matrix is a block diagonal matrix. Each block consists of four circular submatrices. Hence the memory spaces and computational complexity of the system matrix are linear scale. This approach could be easily coupled into domain decomposition method based on variational formulation. Finally, the error estimates of the approximation solutions are given and some test examples are presented.     

The boundary element method for stochastic potential problems

Stochastic Dirichlet and Neumann boundary value problems and stochastic mixed problems have been formulated. As a result the stochastic singular integral equations have been obtained. A way of solving these equations by means of discretization of a boundary using stochastic boundary elements has been presented, resulting in a set of random algebraic equations. It has been proved that for Dirichlet and Neumann problems probabilistic characteristics (i.e. moments: expected value and correlation function) fulfilled deterministic singular integral equations. A numerical method of evaluation of moments on a boundary and inside a domain has been presented.     

A convolution quadrature Galerkin boundary element method for the exterior Neumann problem of the wave equation

The numerical solution of the Neumann problem of the wave equation on unbounded three‐dimensional domains is calculated using the convolution quadrature method for the time discretization and a Galerkin boundary element method for the spatial discretization. The mathematical analysis that has been built up for the Dirichlet problem is extended and developed for the Neumann problem, which is important for many modelling applications. Numerical examples are then presented for one of these applications, modelling transient acoustic radiation. Copyright © 2009 John Wiley & Sons, Ltd.     

Numerical solution of thermal convection problems using the multidomain boundary element method

The multidomain dual reciprocity method (MD‐DRM) has been effectively applied to the solution of two‐dimensional thermal convection problems where the momentum and energy equations govern the motion of a viscous fluid. In the proposed boundary integral method the domain integrals are transformed into equivalent boundary integrals by the dual reciprocity approach applied in a subdomain basis. On each subregion or domain element the integral representation formulas for the velocity and temperature are applied and discretised using linear continuous boundary elements, and the equations from adjacent subregions are matched by additional continuity conditions. Some examples showing the accuracy, the efficiency and flexibility of the proposed method are presented. © 2002 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq 18: 469–489, 2002; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/num.10016     

Energetic boundary element method analysis of wave propagation in 2D multilayered media

The analysis of scalar wave propagation in 2D zonewise homogeneous media with vanishing initial and mixed boundary conditions is carried out. The problem is formulated in terms of time‐dependent boundary integral equations, and then it is set in a weak form, based on a natural energy identity satisfied by the differential problem solution. Several numerical results have been obtained by means of the related energetic Galerkin boundary element method showing accuracy and stability of the method. Copyright © 2012 John Wiley & Sons, Ltd.