On a two-fluid model of two-phase compressible flows and its numerical approximation

We consider a two-fluid model of two-phase compressible flows. First, we derive several forms of the model and of the equations of state. The governing equations in all the forms contain source terms representing the exchanges of momentum and energy between the two phases. These source terms cause unstability for standard numerical schemes. Using the above forms of equations of state, we construct a stable numerical approximation for this two-fluid model. That only the source terms cause the oscillations suggests us to minimize the effects of source terms by reducing their amount. By an algebraic operator, we transform the system to a new one which contains only one source term. Then, we discretize the source term by making use of stationary solutions. We also present many numerical tests to show that while standard numerical schemes give oscillations, our scheme is stable and numerically convergent.     

Credit Derivatives Pricing Based on Lévy Field Driven Term Structure

We use Lévy random fields to model the term structure of forward default intensity, which allows to describe the contagion risks. We consider the pricing of credit derivatives, notably of defaultable bonds in our model. The main result is to prove the pricing kernel as the unique solution of a parabolic integro-differential equation by constructing a suitable contractible operator and then considering the limit case for an unbounded terminal condition. Finally, we illustrate the impact of contagious jump risks on the defaultable bond price by numerical examples.     

Numerical Optimal Harvesting for a Periodic Age-Structured Population Dynamics with Logistic Term

We investigate an optimal harvesting problem for age-structured population dynamics with logistic term and periodic vital rates. We use first-order necessary optimality conditions in order to derive an algorithm to approximate the optimal harvesting effort. We present corresponding numerical experiments.     

Stochastic representation of solution to nonlocal-in-time diffusion

The aim of this paper is to derive a stochastic representation of the solution to a nonlocal-in-time evolution equation (with a historical initial condition), which serves a bridge between normal diffusion and anomalous diffusion. We first derive the Feynman–Kac formula by reformulating the original model into an auxiliary Caputo-type evolution equation with a specific forcing term subject to certain smoothness and compatibility conditions. After that, we confirm that the stochastic formula also provides the solution in the weak sense even though the problem data is nonsmooth. Finally, numerical experiments are presented to illustrate the theoretical results and the application of the stochastic formula.     

A filtered no arbitrage model for term structures from noisy data

We consider an affine term structure model of interest rates, where the factors satisfy a linear diffusion equation. We assume that the information available to an agent comes from observing the yields of a finite number of traded bonds and that this information is not sufficient to reconstruct exactly the factors. We derive a method to obtain arbitrage-free prices of illiquid or non traded bonds that are compatible with the available incomplete information. The method is based on an application of the Kalman filter for linear Gaussian systems.     

A BIOECONOMIC APPROACH TO THE FAUSTMANN–HARTMAN MODEL: ECOLOGICAL INTERACTIONS IN MANAGED FOREST

Abstract This paper develops a bioeconomic forestry model that makes it possible to take ecosystem services that are independent of the age structure of trees into account. We derive the Faustmann–Hartman optimal harvesting strategy as a special case. The bioeconomic model is then extended to account for the fact that forest harvesting decisions impact on other ecological resources, which provide benefits for the wider community. The paper focuses on impacts associated with disturbance caused by logging operations and habitat destruction due to tree removal. This enables us to explore the interactions between forest management and the dynamics of ecological resources. The optimal rotation rule is obtained as a variation on the traditional Faustmann–Hartman equation, where an additional term captures the potential benefits derived from the growth of the ecological resource valued at its shadow price. The steady‐state solutions to the problem and sensitivity to model parameter are identified using numerical analysis.     

Kinks in two-phase lipid bilayer membranes

Common models for two-phase lipid bilayer membranes are based on an energy that consists of an elastic term for each lipid phase and a line energy at interfaces. Although such an energy controls only the length of interfaces, the membrane surface is usually assumed to be at least C ¹ across phase boundaries. We consider the spontaneous curvature model for closed rotationally symmetric two-phase membranes without excluding tangent discontinuities at interfaces a priorily. We introduce a family of energies for smooth surfaces and phase fields for the lipid phases and derive a sharp interface limit that coincides with the Γ-limit on all reasonable membranes and extends the classical model by assigning a bending energy also to tangent discontinuities. The theoretical result is illustrated by numerical examples.     

An Exact Riemann Solver for a Fluidized Bed Model

We study a 2 x 2 hyperbolic system of conservation laws withsource term arising in a fluidized bed model. The system issolved numerically and results are presented to demonstratethe occurrence of ‘slugging’ in the full model equations.The numerical procedure is based on operator splitting and Godunov'smethod, for which we derive the exact solution of the Riemannproblem. A second-order improvement due to Davis (1988) mayproduce small oscillations near shocks and these can be reducedif the underlying flux limiter of the Davis method is replacedby the minmod limiter.     

An E-ARCH model for the term structure of implied volatility of FX options

We construct a statistical model for the term-structure of implied volatilities of currency options based on daily historical data for 13 currency pairs over a 19-month period. We examine the joint evolution of 1 month, 2 month, 3 month, 6 month and 1 year at-the-money (50 δ) options in all the currency pairs. We show that there exist three uncorrelated state variables (principal components) which account for the parallel movement, slope oscillation, and curvature of the term structure and which explain, on average, the movements of the termstructure of volatility to more than 95% in all cases. We test and construct an exponential ARCH, or E-ARCH, model for each state variable. One of the applications of this model is to produce confidence bands for the term structure of volatility.     

The term structure of interest rates in the economic and monetary union

The main purpose of this article is to present a new numerical procedure that can be used to implement a variety of different interest rate models. The new approach allows to construct no-arbitrage models for the term structure, where the stochastic process driving the rates is infinitely divisible, as in the cases of pure-diffusion and jump-diffusion mean reverting models. The new method determines a unique fully specified hexanomial tree, consistent with risk neutral probabilities. A simple forward recursive procedure solves for the entire tree. The proposed lattice model, which generalized the Hull and White [37] single-factor model, is relatively simple, computational efficient and can fit any initial term structure observed in the market. Numerical experiments demonstrate how the jump-diffusion mean reverting model is particularly suited to describe the European money market rates behavior. Interest rates controlled by the monetary authorities behave as if they are jump processes and the term structure, at short maturity, is contingent upon the levels of these official rates.     

Extensions of the Ho and Lee interest-rate model to the multinomial case

The paper presents a state dependent multinomial model of intertemporal changes in the term structure of interest rates. The model is a one-factor interest-rate model within the Markov family models for short-term interest rate and it extends the Ho and Lee [J. Finance XLI (5) (1986) 1001] binomial model. We derive the theoretical basis of the multinomial model, suggest a computational framework to evaluate the model's parameters and investigate the suitability of the model for the Italian market.     

Construction of inclusions with vanishing generalized polarization tensors by imperfect interfaces

We investigate the problem of planar conductivity inclusion with imperfect interface conditions. We assume that the inclusion is simply connected. The presence of the inclusion causes a perturbation in the incident background field. This perturbation admits a multipole expansion of which coefficients we call as the generalized polarization tensors (GPTs), extending the previous terminology for inclusions with perfect interfaces. We derive explicit matrix expressions for the GPTs in terms of the incident field, material parameters, and geometry of the inclusion. As an application, we construct GPT-vanishing structures of general shape that result in negligible perturbations for all uniform incident fields. The structure consists of a simply connected core with an imperfect interface. We provide numerical examples of GPT-vanishing structures obtained by our proposed scheme.     

Block‐centered upwind multistep difference method and convergence analysis for numerical simulation of oil reservoir

The three‐dimensional displacement of two‐phase flow in porous media is a preliminary problem of numerical simulation of energy science and mathematics. The mathematical model is formulated by a nonlinear system of partial differential equations to describe incompressible miscible case. The pressure is defined by an elliptic equation, and the concentration is defined by a convection‐dominated diffusion equation. The pressure generates Darcy velocity and controls the dynamic change of concentration. We adopt a conservative block‐centered scheme to approximate the pressure and Darcy velocity, and the accuracy of Darcy velocity is improved one order. We use a block‐centered upwind multistep method to solve the concentration, where the time derivative is approximated by multistep method, and the diffusion term and convection term are treated by a block‐centered scheme and an upwind scheme, respectively. The composite algorithm is effective to solve such a convection‐dominated problem, since numerical oscillation and dispersion are avoided and computational accuracy is improved. Block‐centered method is conservative, and the concentration and the adjoint function are computed simultaneously. This physical nature is important in numerical simulation of seepage fluid. Using the convergence theory and techniques of priori estimates, we derive optimal estimate error. Numerical experiments and data show the support and consistency of theoretical result. The argument in the present paper shows a powerful tool to solve the well‐known model problem.     

Two extensions for fitting discrete time term structure models with normally distributed factors

This paper provides extensions to procedures for the implementation of two well‐known term structure models. In the first part, a misleading implication given in two textbooks concerning the ability to fit a Ho–Lee type term structure tree through trial and error is corrected, and it is shown that the tree can be fitted precisely with a simple and easily programmable formula. In the second part, a previously published result that obtains the drift for a single‐factor discrete time Heath–Jarrow–Morton model is extended to a multi‐factor world. In both cases numerical examples are provided.     

On a model of a flexural prestressed shell

E. Sanchez‐Palencia We derive a linearized prestressed elastic shell model from a nonlinear Kirchhoff model of elastic plates. The model is given in terms of displacement and micro‐rotation of the cross‐sections. In addition to the standard membrane, transverse shear, and flexural terms, the model also contains a nonstandard prestress term. The prestress is of the same order as flexural effects; hence, the model is appropriate when flexural effects dominate over membrane ones. We prove the existence and uniqueness of the solutions by Lax–Milgram theorem and compare solution with the solution of the standard shell model via numerical examples. Copyright © 2015 John Wiley & Sons, Ltd.     

Multiscale algorithm with high accuracy for the elastic equations in three-dimensional honeycomb structures

In this paper, we consider the elastomechanical problems of a honeycomb structure of composite materials. A multiscale finite element method and the postprocessing technique with high accuracy are presented. We will derive the proofs of all theoretical results. Finally, some numerical tests validate the theoretical results of this paper.     

CEV跳-扩散模型中期权定价研究

考虑了CEV与Kou双指数跳-扩散组合模型中的期权定价问题.首先,运用Ito公式和期权定价的无套利原理,得到了模型下期权价格所满足的偏积-微分方程.然后,运用中心差分和Lagrange线性插值,分别对偏积-微分方程中的微分项和积分项进行离散化处理,再由Euler法,最终得了偏积-微分方程的有限差分格式,并且对差分方法的误差和收敛性进行了分析.最后数值实验验证了该算法是一个稳定且收敛的算法.     

Calibrating affine stochastic mortality models using term assurance premiums

In this paper, we focus on the calibration of affine stochastic mortality models using term assurance premiums. We view term assurance contracts as a “swap” in which policyholders exchange cash flows (premiums vs. benefits) with an insurer analogous to a generic interest rate swap or credit default swap. Using a simple bootstrapping procedure, we derive the term structure of mortality rates from a stream of contract quotes with different maturities. This term structure is used to calibrate the parameters of affine stochastic mortality models where the survival probability is expressed in closed form. The Vasicek, Cox-Ingersoll-Ross, and jump-extended Vasicek models are considered for fitting the survival probabilities term structure. An evaluation of the performance of these models is provided with respect to premiums of three Italian insurance companies.     

Calibration of the default probability model

In this paper, we study the calibration problem for the Merton–Vasicek default probability model [Robert Merton, On the pricing of corporate debt: the risk structure of interest rate, Journal of Finance 29 (1974) 449–470]. We derive conditions that guarantee existence and uniqueness of the solution. Using analytical properties of the model, we propose a fast calibration procedure for the conditional default probability model in the integrated market and credit risk framework. Our solution allows one to avoid numerical integration problems as well as problems related to the numerical solution of the nonlinear equations.     

A stochastic multiscale model for electricity generation capacity expansion

Long-term planning for electric power systems, or capacity expansion, has traditionally been modeled using simplified models or heuristics to approximate the short-term dynamics. However, current trends such as increasing penetration of intermittent renewable generation and increased demand response requires a coupling of both the long and short term dynamics. We present an efficient method for coupling multiple temporal scales using the framework of singular perturbation theory for the control of Markov processes in continuous time. We show that the uncertainties that exist in many energy planning problems, in particular load demand uncertainty and uncertainties in generation availability, can be captured with a multiscale model. We then use a dimensionality reduction technique, which is valid if the scale separation present in the model is large enough, to derive a computationally tractable model. We show that both wind data and electricity demand data do exhibit sufficient scale separation. A numerical example using real data and a finite difference approximation of the Hamilton–Jacobi–Bellman equation is used to illustrate the proposed method. We compare the results of our approximate model with those of the exact model. We also show that the proposed approximation outperforms a commonly used heuristic used in capacity expansion models.