A general control variate method for option pricing under Lévy processes

We present a general control variate method for simulating path dependent options under Lévy processes. It is based on fast numerical inversion of the cumulative distribution functions and exploits the strong correlation of the payoff of the original option and the payoff of a similar option under geometric Brownian motion. The method is applicable for all types of Lévy processes for which the probability density function of the increments is available in closed form. Numerical experiments confirm that our method achieves considerable variance reduction for different options and Lévy processes. We present the applications of our general approach for Asian, lookback and barrier options under variance gamma, normal inverse Gaussian, generalized hyperbolic and Meixner processes.     

A queueing model for mixed loss-delay systems with general interarrival processes for wide-band calls

We investigate the single link mixed loss-delay FIFO system with the exponential holding time distribution, the Markovian interarrival process for the narrow-band calls, and the general independently and identically distributed interarrival process for the wide-band calls. This is achieved by combining the embedded Markov chain method and the matrix-analytic technique.     

A general stability result for the semilinear viscoelastic wave model under localized effects

Our main goal in the present work is to address an integro-differential model under localized viscoelastic and frictional effects arising in the Boltzmann theory of viscoelasticity. More precisely, we consider a general version in the history context of the pioneer localized viscoelastic problem approached by Cavalcanti and Oquendo (2003) in the null history scenario, and more recently by Cavalcanti et al. (2018) in the history framework. By means of a new observability inequality, we prove a general stability result to the model under a weaker assumption on the localized frictional damping and a slower condition on the decreasing memory kernel (of polynomial type) than the previously mentioned works. To achieve such stability results, we still work in a general setting by removing the assumption on complementary damping mechanisms and show, in some reasonable situations concerning the density coefficient, that the localized viscoelastic effect is enough to ensure the general stability (of polynomial type) to the problem.     

Markov cubature rules for polynomial processes

We study discretizations of polynomial processes using finite state Markov processes satisfying suitable moment matching conditions. The states of these Markov processes together with their transition probabilities can be interpreted as Markov cubature rules. The polynomial property allows us to study such rules using algebraic techniques. Markov cubature rules aid the tractability of path-dependent tasks such as American option pricing in models where the underlying factors are polynomial processes.     

Continuous sampling plans for Markov-dependent production processes under limited inspection capacity

A continuous sampling plan is a set of rules that provide a given Average Outgoing Quality (AOQ), ideally with the minimum of effort (as measured by the Average Fraction Inspected, or AFI). Most such plans are based on the assumption that the quality (either defective or not) of successive production units is uncorrelated. In this paper, we explore the impact of correlation in the production process on the design of a sampling plan when it is not possible to inspect long runs of production unit-by-unit. We shall generalize Dodge's continuous sampling plan on two counts, replacing Level 1 100% inspection by 100f_o% inspection, and considering the production process to be Markov dependent instead of consisting of independent Bernoulli trials. We derive formulae for the AOQ and AFI, and consider how best to choose the sampling plan parameters in the presence of nonzero correlation.     

A batch arrival retrial queue with general retrial times under Bernoulli vacation schedule for unreliable server and delaying repair

This paper deals with the steady state behaviour of an M^x/G/1 queue with general retrial time and Bernoulli vacation schedule for an unreliable server, which consists of a breakdown period and delay period. Here we assume that customers arrive according to compound Poisson processes. While the server is working with primary customers, it may breakdown at any instant and server will be down for short interval of time. Further concept of the delay time is also introduced. The primary customer finding the server busy, down or vacation are queued in the orbit in accordance with FCFS (first come first served) retrial policy. After the completion of a service, the server either goes for a vacation of random length with probability p or may continue to serve for the next customer, if any with probability (1 − p). We carry out an extensive analysis of this model. Finally, we obtain some important performance measures and reliability indices of this model.     

A mathematical model for the calculation of ceramic batch formulas

In the ceramic field the process of forming a ceramic body consists of several steps that must be executed efficiently and controlled closely to achieve the desired product. A major step in the process is the selection of raw materials, which not only will provide the necessary oxides, but also will melt and fine well to form a high-quality product. This process, if carried out on a trial-and-error manner, may lead to an uneconomical production cost due to wrong materials being selected. In addition, some important physical batch characteristics may be ignored owing to the increase in computational requirements if more constraints are added to the process. In this paper we propose the mathematical modelling approach, which has gained very little attention from researchers in this field, as an alternative to the trial-and-error approach. The model presented in this paper may be used to calculate the batch formula of a designed product without first knowing its empirical formula. An illustrated example of the use of this model is also provided.     

Terminal constrained robust hybrid iterative learning model predictive control for complex time-delayed batch processes

This work mainly addresses terminal constrained robust hybrid iterative learning model predictive control against time delay and uncertainties in a class of complex batch processes with input and output constraints. In this work, an equivalently novel extended two-dimensional switched system is first constructed to represent the process model by introducing state difference, output error and new relaxation variable information. Then, a hybrid predictive updating controller is proposed and an optimal performance index function including terminal constraints is designed. Under the condition that the switching signal meets certain conditions, the solvable problem of model predictive control is realized by Lyapunov stability theory. Meanwhile, the design scheme of controller parameters is also given. In addition, the robust constraint set is adopted to overcome the disadvantage that the traditional asymptotic stability cannot converge to the origin when it involves disturbances, such that the system state converges to the constraint set and meets its expected value. Finally, the effectiveness of the proposed algorithm is verified by controlling the speed and pressure parameters of the injection molding process.     

A general model for matroids and the greedy algorithm

We present a general model for set systems to be independence families with respect to set families which determine classes of proper weight functions on a ground set. Within this model, matroids arise from a natural subclass and can be characterized by the optimality of the greedy algorithm. This model includes and extends many of the models for generalized matroid-type greedy algorithms proposed in the literature and, in particular, integral polymatroids. We discuss the relationship between these general matroids and classical matroids and provide a Dilworth embedding that allows us to represent matroids with underlying partial order structures within classical matroids. Whether a similar representation is possible for matroids on convex geometries is an open question. S. Fujishige’s research was supported by a Grant-in-Aid for Scientific Research of the Ministry of Education, Culture, Sports, Science and Technology of Japan.     

A semi-analytic pricing formula for lookback options under a general stochastic volatility model

In general, the pricing problems of exotic options in finance do not have analytic solutions under stochastic volatility and so it is hard to compute the option prices or at least it requires much of time to compute them. This paper investigates a semi-analytic pricing method for lookback options in a general stochastic volatility framework. The resultant formula is well connected to the Black–Scholes price that is the first term of a series expansion, which makes computing the option prices relatively efficient. Further, a convergence condition for the expansion is provided with an error bound.     

A stochastic model for a general load‐sharing system under overload condition

A load‐sharing parallel system functions if at least one unit in the system is functioning and the surviving units share the load. In most of research on load‐sharing system, the performance of the system has been studied only for the case when the lifetimes of components in the system follow exponential distributions. In this paper a load‐sharing parallel system is considered when the lifetimes of the units in the system are any continuous random variables. The reliability function of the system is derived and the problem of load allocation is also considered. Copyright © 2009 John Wiley & Sons, Ltd.     

Monotonicity in multidimensional Markov decision processes for the batch dispatch problem

Structural properties of stochastic dynamic programs are essential to understanding the nature of the solutions and in deriving appropriate approximation techniques. We concentrate on a class of multidimensional Markov decision processes and derive sufficient conditions for the monotonicity of the value functions. We illustrate our result in the case of the multiproduct batch dispatch (MBD) problem.     

Exact capacity results for stable processes

Exact results are proved for the capacity of pullbacks of analytic sets by stable processes. Received: 25 May 1988 / Revised version: 15 September 1997     

A general framework for cooperation under uncertainty

In this paper, we introduce a general framework for situations with decision making under uncertainty and cooperation possibilities. This framework is based upon a two stage stochastic programming approach. We show that under relatively mild assumptions the associated cooperative games are totally balanced. Finally, we consider several example situations.     

A general age-replacement model with minimal repair under renewing free-replacement warranty

A general age-replacement model in which incorporates minimal repair, planned and unplanned replacement, is considered in this paper for products under a renewing free-replacement warranty policy. For both warranted and non-warranted products, cost models from the user’s perspective are developed, and the corresponding optimal replacement ages are derived such that the long-run expected cost rate is minimized. The impacts of a product warranty on the optimal replacement model are investigated analytically. Furthermore, we show that the optimal replacement age for a warranted product is closer to the end of the warranty period than for a non-warranted product. Finally, numerical examples are given for illustration.     

A maximal domain for strategy-proof and no-vetoer rules in the multi-object choice model

Following “Barberà et al. (1991, Econometrica 59:595–609)”, we study rules (or social choice functions) through which agents select a subset from a set of objects. We investigate domains on which there exist nontrivial strategy-proof rules. We establish that the set of separable preferences is a maximal domain for the existence of rules satisfying strategy-proofness and no-vetoer.     

A general framework for frequentist model averaging

Science China Mathematics - Model selection strategies have been routinely employed to determine a model for data analysis in statistics, and further study and inference then often proceed as...