Novel numerical techniques for the finite moment log stable computational model for European call option

Option pricing models are often used to describe the dynamic characteristics of prices in financial markets. Unlike the classical Black–Scholes (BS) model, the finite moment log stable (FMLS) model can explain large movements of prices during small time steps. In the FMLS, the second-order spatial derivative of the BS model is replaced by a fractional operator of order α which generates an α-stable Lévy process. In this paper, we consider the finite difference method to approximate the FMLS model. We present two numerical schemes for this approximation: the implicit numerical scheme and the Crank–Nicolson scheme. We carry out convergence and stability analyses for the proposed schemes. Since the fractional operator routinely generates dense matrices which often require high computational cost and storage memory, we explore three methods for solving the approximation schemes: the Gaussian elimination method, the bi-conjugate gradient stabilized method (Bi-CGSTAB) and the fast Bi-CGSTAB (FBi-CGSTAB) in order to compare the cost of calculations. Finally, two numerical examples with exact solutions are presented where we also use extrapolation techniques to achieve higher-order convergence. The results suggest that the proposed schemes are unconditionally stable and convergent, and the FMLS model is useful for pricing options.     

A fast second‐order difference scheme for the space–time fractional equation

In this paper, a fast second‐order accurate difference scheme is proposed for solving the space–time fractional equation. The temporal Caputo derivative is approximated by ?L2 ‐1_σ formula which employs the sum‐of‐exponential approximation to the kernel function appeared in Caputo derivative. The second‐order linear spline approximation is applied to the spatial Riemann–Liouville derivative. At each time step, a fast algorithm, the preconditioned conjugate gradient normal residual method with a circulant preconditioner (PCGNR), is used to solve the resulting system that reduces the storage and computational cost significantly. The unique solvability and unconditional convergence of the difference scheme are shown by the discrete energy method. Numerical examples are given to verify numerical accuracy and efficiency of the difference schemes.     

On a terminal value problem for a generalization of the fractional diffusion equation with hyper-Bessel operator

In this paper, we consider an inverse problem of recovering the initial value for a generalization of time-fractional diffusion equation, where the time derivative is replaced by a regularized hyper-Bessel operator. First, we investigate the existence and regularity of our terminal value problem. Then we show that the backward problem is ill-posed, and we propose a regularizing scheme using a fractional Tikhonov regularization method. We also present error estimates between the regularized solution and the exact solution using two parameter choice rules.     

解三维抛物型方程的一个高精度显式差分格式

提出了求解三维抛物型方程的一个高精度显式差分格式.首先,推导了一个特殊节点处一阶偏导数(■u)/(■/t)的一个差分近似表达式,利用待定系数法构造了一个显式差分格式,通过选取适当的参数使格式的截断误差在空间层上达到了四阶精度和在时间层上达到了三阶精度.然后,利用Fourier分析法证明了当r1/6时,差分格式是稳定的.最后,通过数值试验比较了差分格式的解与精确解的区别,结果说明了差分格式的有效性.     

A numerical technique based on B-spline for a class of time-fractional diffusion equation

This paper presents an efficient numerical technique for solving a class of time-fractional diffusion equation. The time-fractional derivative is described in the Caputo form. The L1 scheme is used for discretization of Caputo fractional derivative and a collocation approach based on sextic B-spline basis function is employed for discretization of space variable. The unconditional stability of the fully-discrete scheme is analyzed. Two numerical examples are considered to demonstrate the accuracy and applicability of our scheme. The proposed scheme is shown to be sixth order accuracy with respect to space variable and (2 − α)-th order accuracy with respect to time variable, where α is the order of temporal fractional derivative. The numerical results obtained are compared with other existing numerical methods to justify the advantage of present method. The CPU time for the proposed scheme is provided.     

Optimal error estimate of two linear and momentum-preserving Fourier pseudo-spectral schemes for the RLW equation

In this paper, two novel linear-implicit and momentum-preserving Fourier pseudo-spectral schemes are proposed and analyzed for the regularized long-wave equation. The numerical methods are based on the blend of the Fourier pseudo-spectral method in space and the linear-implicit Crank–Nicolson method or the leap-frog scheme in time. The two fully discrete linear schemes are shown to possess the discrete momentum conservation law, and the linear systems resulting from the schemes are proved uniquely solvable. Due to the momentum conservative property of the proposed schemes, the Fourier pseudo-spectral solution is proved to be bounded in the discrete L^∞ norm. Then by using the standard energy method, both the linear-implicit Crank–Nicolson momentum-preserving scheme and the linear-implicit leap-frog momentum-preserving scheme are shown to have the accuracy of in the discrete L^∞ norm without any restrictions on the grid ratio, where N is the number of nodes and τ is the time step size. Numerical examples are carried out to verify the correction of the theory analysis and the efficiency of the proposed schemes.     

A Linear Algebraic Approach to Metering Schemes

A metering scheme is a method by which an audit agency is able to measure the interaction between servers and clients during a certain number of time frames. Naor and Pinkas (Vol. 1403 of LNCS, pp. 576–590) proposed metering schemes where any server is able to compute a proof (i.e., a value to be shown to the audit agency at the end of each time frame), if and only if it has been visited by a number of clients larger than or equal to some threshold h during the time frame. Masucci and Stinson (Vol. 1895 of LNCS, pp. 72–87) showed how to construct a metering scheme realizing any access structure, where the access structure is the family of all subsets of clients which enable a server to compute its proof. They also provided lower bounds on the communication complexity of metering schemes. In this paper we describe a linear algebraic approach to design metering schemes realizing any access structure. Namely, given any access structure, we present a method to construct a metering scheme realizing it from any linear secret sharing scheme with the same access structure. Besides, we prove some properties about the relationship between metering schemes and secret sharing schemes. These properties provide some new bounds on the information distributed to clients and servers in a metering scheme. According to these bounds, the optimality of the metering schemes obtained by our method relies upon the optimality of the linear secret sharing schemes for the given access structure.     

Compact finite difference scheme for the solution of time fractional advection-dispersion equation

In this paper, a compact finite difference method is proposed for the solution of time fractional advection-dispersion equation which appears extensively in fluid dynamics. In this approach the time fractional derivative of mentioned equation is approximated by a scheme of order O(τ ^2???α ), 0?<?α?<?1, and spatial derivatives are replaced with a fourth order compact finite difference scheme. We will prove the unconditional stability and solvability of proposed scheme. Also we show that the method is convergence with convergence order O(τ ^2???α ?+?h ⁴). Numerical examples confirm the theoretical results and high accuracy of proposed scheme.     

Numerical method for generalized time fractional KdV-type equation

In this article, an efficient numerical method for linearized and nonlinear generalized time-fractional KdV-type equations is proposed by combining the finite difference scheme and Petrov–Galerkin spectral method. The scale and weight functions involved in generalized fractional derivative cause too much difficulty in discretization and numerical analysis. Fortunately, motivated by finite difference method for fractional differential equation on graded mesh, the stability and convergence of the constructed method are established rigorously. It is proved that the full discretization schemes of generalized time-fractional KdV-type equation is unconditionally stable in linear case. While for nonlinear case, it is stable under a CFL condition and for not small ϵ, coefficient of the high-order spatial differential term. In addition, the full discretization schemes with respect to linear and nonlinear cases respectively converge to the associated exact solutions with orders and , where τ, α, N and m accordingly indicate the time step size, the order of the fractional derivative, polynomial degree, and regularity of the exact solution. Numerical experiments are carried out to support the theoretical results.     

The stability and convergence of two linearized finite difference schemes for the nonlinear epitaxial growth model

The numerical simulation of the dynamics of the molecular beam epitaxy (MBE) growth is considered in this article. The governing equation is a nonlinear evolutionary equation that is of linear fourth order derivative term and nonlinear second order derivative term in space. The main purpose of this work is to construct and analyze two linearized finite difference schemes for solving the MBE model. The linearized backward Euler difference scheme and the linearized Crank‐Nicolson difference scheme are derived. The unique solvability, unconditional stability and convergence are proved. The linearized Euler scheme is convergent with the convergence order of O(τ + h²) and linearized Crank‐Nicolson scheme is convergent with the convergence order of O(τ² + h²) in discrete L²‐norm, respectively. Numerical stability with respect to the initial conditions is also obtained for both schemes. Numerical experiments are carried out to demonstrate the theoretical analysis. © 2011 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq, 2011     

A fully discrete spectral method for fractional Cattaneo equation based on Caputo–Fabrizo derivative

Recently Caputo and Fabrizio introduced a new derivative with fractional order without singular kernel. The derivative can be used to describe the material heterogeneities and the fluctuations of different scales. In this article, we derived a new discretization of Caputo–Fabrizio derivative of order α (1 < α < 2) and applied it into the Cattaneo equation. A fully discrete scheme based on finite difference method in time and Legendre spectral approximation in space is proposed. The stability and convergence of the fully discrete scheme are rigorously established. The convergence rate of the fully discrete scheme in H¹ norm is O(τ² + N^1?m), where τ, N and m are the time‐step size, polynomial degree and regularity in the space variable of the exact solution, respectively. Furthermore, the accuracy and applicability of the scheme are confirmed by numerical examples to support the theoretical results.     

MAP 1, MAP2 /M/c retrial queue with guard channels and its application to cellular networks

In this paper, we investigate the impact of retrial phenomenon on loss probabilities and compare loss probabilities of several channel allocation schemes giving higher priority to hand-off calls in the cellular mobile wireless network. In general, two channel allocation schemes giving higher priority to hand-off calls are known; one is the scheme with the guard channels for hand-off calls and the other is the scheme with the priority queue for hand-off calls. For mathematical unified model for both schemes, we consider theMAP ₁,MAP ₂ /M/c/b, ∞ retrial queue with infinite retrial group, geometric loss, guard channels and finite priority queue for hand-off class. We approximate the joint distribution of two queue lengths by Neuts' method and also obtain waiting time distribution for hand-off calls. From these results, we obtain the loss probabilities, the mean waiting time and the mean queue lengths. We give numerical examples to show the impact of the repeated attempt and to compare loss probabilities of channel allocation schemes.     

Second order unconditionally convergent and energy stable linearized scheme for MHD equations

In this paper, we propose an efficient numerical scheme for magnetohydrodynamics (MHD) equations. This scheme is based on a second order backward difference formula for time derivative terms, extrapolated treatments in linearization for nonlinear terms. Meanwhile, the mixed finite element method is used for spatial discretization. We present that the scheme is unconditionally convergent and energy stable with second order accuracy with respect to time step. The optimal L ² and H ¹ fully discrete error estimates for velocity, magnetic variable and pressure are also demonstrated. A series of numerical tests are carried out to confirm our theoretical results. In addition, the numerical experiments also show the proposed scheme outperforms the other classic second order schemes, such as Crank-Nicolson/Adams-Bashforth scheme, linearized Crank-Nicolson’s scheme and extrapolated Gear’s scheme, in solving high physical parameters MHD problems.     

A new hypothesis concerning children’s fractional knowledge

The basic hypothesis of the teaching experiment, The Child’s Construction of the Rational Numbers of Arithmetic (Steffe & Olive, 1990) was that children’s fractional schemes can emerge as accommodations in their numerical counting schemes. This hypothesis is referred to as the reorganization hypothesis because when a new scheme is established by using another scheme in a novel way, the new scheme can be regarded as a reorganization of the prior scheme. In that case where children’s fractional schemes do emerge as accommodations in their numerical counting schemes, I regard the fractional schemes as superseding their earlier numerical counting schemes. If one scheme supersedes another, that does not mean the earlier scheme is replaced by the superseding scheme. Rather, it means that the superseding scheme solves the problems the earlier scheme solved but solves them better, and it solves new problems the earlier scheme didn’t solve. It is in this sense that we hypothesized children’s fractional schemes can supersede their numerical counting schemes and it is the sense in which we regarded numerical schemes as constructive mechanisms in the production of fractional schemes (Kieren, 1980).     

A two-grid method for elliptic problem with boundary layers

A two-grid method for the elliptic equation with a small parameter ε multiplying the highest derivative is investigated. The difference schemes with the property of ε-uniform convergence on a uniform mesh and on Shishkin mesh are considered. In both cases, a two-grid method for resolving the difference scheme is investigated. A two-grid method has features that are concerned with a uniform convergence of a difference scheme. To increase the accuracy, the Richardson extrapolation in two-grid method is applied. Numerical results are discussed.     

Nonlinear Galerkin method and two-step method for the Navier-Stokes equations

This article represents a new nonlinear Galerkin scheme for the Navier-Stokes equations. This scheme consists of a nonlinear Galerkin finite element method and a two-step difference method. Moreover, we also provide a Galerkin scheme. By convergence analysis, two numerical schemes have the same second-order convergence accuracy for the spatial discretization and time discretization if H is chosen such that H = O(h^2/3). However, the nonlinear Galerkin scheme is simpler than the Galerkin scheme, namely, this scheme can save a large amount of computational time. © 1996 John Wiley & Sons, Inc.     

RBFs approximation method for time fractional partial differential equations

In this paper, radial basis functions (RBFs) approximation method is implemented for time fractional advection–diffusion equation on a bounded domain. In this method the first order time derivative is replaced by the Caputo fractional derivative of order α ∈ (0, 1], and spatial derivatives are approximated by the derivative of interpolation in the Kansa method. Stability and convergence of the method is discussed. Several numerical examples are include to demonstrate effectiveness and accuracy of the method.     

一种基于TV分裂的真正多维Riemann解法器

给出了一种真正多维的HLL Riemann解法器.采用TV(Toro-Vázquez)分裂将通量分裂成对流通量和压力通量,其中对流通量的计算采用类似于AUSM格式的迎风方法,压力通量的计算采用波速基于压力系统特征值的HLL格式,并将HLL格式耗散项中的密度差用压力差代替,来克服传统的HLL格式不能分辨接触间断的缺点.为了实现数值格式真正多维的特性,分别计算网格界面中点和角点上的数值通量,并且采用Simpson公式加权中点和角点上的数值通量来得到网格界面上的数值通量.采用基于SDWLS(solution dependent weighted least squares)梯度的线性重构来获得空间的二阶精度,时间离散采用二阶Runge-Kutta格式.数值实验表明,相比于传统的一维HLL格式,该文的真正多维HLL格式具有能够分辨接触间断,消除慢行激波波后振荡以及更大的时间步长等优点.并且,与其他能够分辨接触间断的格式（例如HLLC格式）不同的是,真正多维的HLL格式在计算二维问题时不会出现数值激波不稳定现象.     

The Poisson equation with local nonregular similarities

Moffatt and Duffy [1] have shown that the solution to the Poisson equation, defined on rectangular domains, includes a local similarity term of the form: r²log(r)cos(2θ). The latter means that the second (and higher) derivative of the solution with respect to r is singular at r = 0. Standard high‐order numerical schemes require the existence of high‐order derivatives of the solution. Thus, for the case considered by Moffatt and Duffy, the high‐order finite‐difference schemes loose their high‐order convergence due to the nonregularity at r = 0. In this article, a simple method is outlined to regain the high‐order accuracy of these schemes, without the need of any modification in the scheme's algorithm. This is a significant consideration when one wants to use a given finite‐difference computer code for problems with local nonregular similarity solutions. Numerical examples using the modified scheme in conjunction with a sixth‐order finite difference approximation are provided. © 2001 John Wiley & Sons, Inc. Numer Methods Partial Differential Eq 17:336–346, 2001