Explicit solutions in one-sided optimal stopping problems for one-dimensional diffusions

Consider the optimal stopping problem of a one-dimensional diffusion with positive discount. Based on Dynkin's characterization of the value as the minimal excessive majorant of the reward and considering its Riesz representation, we give an explicit equation to find the optimal stopping threshold for problems with one-sided stopping regions, and an explicit formula for the value function of the problem. This representation also gives light on the validity of the smooth-fit (SF) principle. The results are illustrated by solving some classical problems, and also through the solution of: optimal stopping of the skew Brownian motion and optimal stopping of the sticky Brownian motion, including cases in which the SF principle fails.     

Markov processes on Riesz spaces

Measure-free discrete time stochastic processes in Riesz spaces were formulated and studied by Kuo, Labuschagne and Watson. Aspects relating martingales, stopping times, convergence of these processes as well as various decomposition were considered. Here we formulate and study Markov processes in a measure-free Riesz space setting.     

Discrete-time stochastic processes on Riesz spaces

It has been recognised that order is closely linked with probability theory, with lattice theoretic approaches being used to study Markov processes but, to our knowledge, the complete theory of (sub, super) martingales and their stopping times has not been formulated on Riesz spaces. We generalize the concepts of stochastic processes, (sub, super) martingales and stopping times to Riesz spaces. In this paper we consider discrete time processes with bounded stopping times.     

Operators in pre-Riesz spaces: moduli and homomorphisms

We focus on two topics that are related to moduli of elements in partially ordered vector spaces. First, we relate operators that preserve moduli to generalized notions of lattice homomorphisms, such as Riesz homomorphisms, Riesz* homomorphisms, and positive disjointness preserving operators. We also consider complete Riesz homomorphisms, which generalize order continuous lattice homomorphisms. Second, we characterize elements with a modulus by means of disjoint elements and apply this result to obtain moduli of functionals and operators in various settings. On spaces of continuous functions, we identify those differences of Riesz* homomorphisms that have a modulus. Many of our results for pre-Riesz spaces of continuous functions lead to results on order unit spaces, where the functional representation is used.

     

Amarts on Riesz Spaces

The concepts of conditional expectations, martingales and stopping times were extended to the Riesz space context by Kuo, Labuschagne and Watson （Discrete time stochastic processes on Riesz spaces, Indag. Math.,15（2004）, 435-451）. Here we extend the definition of an asymptotic martingale （amart） to the Riesz spaces context, and prove that Riesz space amarts can be decomposed into the sum of a martingale and an adapted sequence convergent to zero. Consequently an amart convergence theorem is deduced.     

State reconstruction of a distributed parameter system with exact observability

We study the problem of state reconstruction for exactly observable systems. Here we present two approaches for state reconstruction, the Riesz basis approach and the dual Hilbert uniqueness method (HUM) based on an iteration algorithm. The Riesz basis approach gives an explicit representation of the initial state of the system, whereas the HUM dual method gives an efficient approximation of the initial state.     

侧完备Riesz空间中理想的直和及其表示定理

设{Ei：i∈I)是侧完备Riesz空间E中的一族理想，且Ei∩Ej=θ(i，j∈I，i≠j)．文章引入理想族{Ei：i∈I)直和的概念，并给出一个表示定理．文章证明了：存在一个完备的正则Hausdorff空间X使得理想族的直和Riesz同构于C(X)其充要条件是对每个i∈I存在一个紧Hausdorff空间Xi使得Ei Riesz同构于C(X)．     

Monotone stopping rules forstochastic processes in a semimartingale representation with applications

A monotone stopping problem is considered for stochastic processes in a semimartingale representation. Such a representation allows a direct infinitesimal characterization of the optimal stopping time. Transformations of such processes are investigated, which leave the semimartingale property unchanged. One of these transformations is a change of tiltration which leads to the stopping problem with partial information. Findly an application is discussed.     

Doob’s optional sampling theorem in Riesz spaces

The notions of stopping times and stopped processes for continuous stochastic processes are defined and studied in the framework of Riesz spaces. This leads to a formulation and proof of Doob’s optional sampling theorem.     

Characterization of integrals with respect to arbitrary radon measures by the boundedness indices

The problem of characterization of integrals as linear functionals is considered in the paper. It starts from the familiar results of F. Riesz (1909) and J. Radon (1913) on integral representation of bounded linear functionals by Riemann?CStieltjes integrals on a segment and by Lebesgue integrals on a compact in $ {\mathbb{R}^n} $ , respectively. After works of J. Radon, M. Fréchet, and F. Hausdorff the problem of characterization of integrals as linear functionals took the particular form of the problem of extension of Radon??s theorem from $ {\mathbb{R}^n} $ to more general topological spaces with Radon measures. This problem has turned out difficult and its solution has a long and rich history. Therefore, it may be naturally called the Riesz?CRadon?CFréchet problem of characterization of integrals. The important stages of its solution are connected with such mathematicians as S. Banach, S. Saks, S. Kakutani, P. Halmos, E. Hewitt, R. E. Edwards, N. Bourbaki, V. K. Zakharov, A. V. Mikhalev, et al. In this paper, the Riesz?CRadon?CFr??echet problem is solved for the general case of arbitrary Radon measures on Hausdorff spaces. The solution is given in the form of a general parametric theorem in terms of a new notion of the boundedness index of a functional. The theorem implies as particular cases well-known results of the indicated authors characterizing Radon integrals for various classes of Radon measures and topological spaces.     

Ergodic theory and the Strong Law of Large Numbers on Riesz spaces

In [W.-C. Kuo, C.C.A. Labuschagne, B.A. Watson, Discrete-time stochastic processes on Riesz spaces, Indag. Math. (N.S.) 15 (3) (2004) 435-451], we introduced the concepts of conditional expectations, martingales and stopping times on Riesz spaces. Here we formulate and prove order theoretic analogues of the Birkhoff, Hopf and Wiener ergodic theorems and the Strong Law of Large Numbers on Riesz spaces (vector lattices).     

Valuing continuous-installment options

Installment options are path-dependent contingent claims in which the premium is paid discretely or continuously in installments, instead of paying a lump sum at the time of purchase. This paper deals with valuing European continuous-installment options written on dividend-paying assets in the standard Black–Scholes–Merton framework. The valuation of installment options can be formulated as a free boundary problem, due to the flexibility of continuing or stopping to pay installments. On the basis of a PDE for the initial premium, we derive an integral representation for the initial premium, being expressed as a difference of the corresponding European vanilla value and the expected present value of installment payments along the optimal stopping boundary. Applying the Laplace transform approach to this PDE, we obtain explicit Laplace transforms of the initial premium as well as its Greeks, which include the transformed stopping boundary in a closed form. Abelian theorems of Laplace transforms enable us to characterize asymptotic behaviors of the stopping boundary close and at infinite time to expiry. We show that numerical inversion of these Laplace transforms works well for computing both the option value and the optimal stopping boundary.     

Constructive Pointfree Topology Eliminates Non-constructive Representation Theorems from Riesz Space Theory

In Riesz space theory it is good practice to avoid representation theorems which depend on the axiom of choice. Here we present a general methodology to do this using pointfree topology. To illustrate the technique we show that Archimedean almost f-algebras are commutative. The proof is obtained relatively straightforward from the proof by Buskes and van Rooij by using the pointfree Stone-Yosida representation theorem by Coquand and Spitters.     

Optimal error estimation for Petrov-Galerkin methods in two dimensions

Summary We examine the optimality of conforming Petrov-Galerkin approximations for the linear convection-diffusion equation in two dimensions. Our analysis is based on the Riesz representation theorem and it provides an optimal error estimate involving the smallest possible constantC. It also identifies an optimal test space, for any choice of consistent norm, as that whose image under the Riesz representation operator is the trial space. By using the Helmholtz decomposition of the Hilbert space [L ²()]², we produce a construction for the constantC in which the Riesz representation operator is not required explicitly. We apply the technique to the analysis of the Galerkin approximation and of an upwind finite element method.     

Weak Solvability of the Dirichlet Problem on Stratified Sets

The Dirichlet problem is posed for an analog of the Beltrami--Laplace operator on sets consisting of manifolds of various dimensions regularly adjacent to one another (stratified sets). A special system of notions permits one to prove analogs of Green's integral identities and the Poincaré inequality for Sobolev type spaces. The weak solvability of the Dirichlet problem for this operator, as well as for an analog of the biharmonic operator, is proved on the basis of the Riesz theorem on the representation of linear functionals.     

Characterization of radon integrals as linear functionals

The problem of characterization of integrals as linear functionals is considered in this paper. It has its origin in the well-known result of F. Riesz (1909) on integral representation of bounded linear functionals by Riemann?CStieltjes integrals on a segment and is directly connected with the famous theorem of J. Radon (1913) on integral representation of bounded linear functionals by Lebesgue integrals on a compact in ? ⁿ . After the works of J. Radon, M. Fréchet, and F. Hausdorff, the problem of characterization of integrals as linear functionals has been concretized as the problem of extension of Radon??s theorem from ? ⁿ to more general topological spaces with Radon measures. This problem turned out to be difficult, and its solution has a long and abundant history. Therefore, it may be naturally called the Riesz?CRadon?CFréchet problem of characterization of integrals. The important stages of its solution are connected with such eminent mathematicians as S. Banach (1937?C38), S. Saks (1937?C38), S. Kakutani (1941), P. Halmos (1950), E. Hewitt (1952), R. E. Edwards (1953), Yu. V. Prokhorov (1956), N. Bourbaki (1969), H. K¨onig (1995), V. K. Zakharov and A. V. Mikhalev (1997), et al. Essential ideas and technical tools were worked out by A. D. Alexandrov (1940?C43), M. N. Stone (1948?C49), D. H. Fremlin (1974), et al. The article is devoted to the modern stage of solving this problem connected with the works of the authors (1997?C2009). The solution of the problem is presented in the form of the parametric theorems on characterization of integrals. These theorems immediately imply characterization theorems of the above-mentioned authors.     

Using a level set approach for image segmentation under interpolation conditions

In this paper, we propose a new 2D segmentation model including geometric constraints, namely interpolation conditions, to detect objects in a given image. We propose to apply the deformable models to an explicit function using the level set approach (Osher and Sethian [24]); so, we avoid the classical problem of parameterization of both segmentation representation and interpolation conditions. Furthermore, we allow this representation to have topological changes. A problem of energy minimization on a closed subspace of a Hilbert space is defined and introducing Lagrange multipliers enables us to formulate the corresponding variational problem with interpolation conditions. Thus the explicit function evolves, while minimizing the energy and it stops evolving when the desired outlines of the object to detect are reached. The stopping term, as in the classical deformable models, is related to the gradient of the image. Numerical results are given. AMS subject classification 74G65, 46-xx, 92C55     

Riesz–Jacobi Transforms as Principal Value Integrals

We establish an integral representation for the Riesz transforms naturally associated with classical Jacobi expansions. We prove that the Riesz–Jacobi transforms of odd orders express as principal value integrals against kernels having non-integrable singularities on the diagonal. On the other hand, we show that the Riesz–Jacobi transforms of even orders are not singular operators. In fact they are given as usual integrals against integrable kernels plus or minus, depending on the order, the identity operator. Our analysis indicates that similar results, existing in the literature and corresponding to several other settings related to classical discrete and continuous orthogonal expansions, should be reinvestigated so as to be refined and in some cases also corrected.     

Optimal Stopping of Stochastic Differential Equations with Delay Driven by Lévy Noise

We study an optimal stopping problem for a stochastic differential equation with delay driven by a Lévy noise. Approaching the problem by its infinite-dimensional representation, we derive conditions yielding an explicit solution to the problem. Applications to the American put option problem are shown.