Fractional Fokker-Planck Equation and Black-Scholes Formula in Composite-Diffusive Regime

In statistical physics, anomalous diffusion plays an important role, whose applications have been found in many areas. In this paper, we introduce a composite-diffusive fractional Brownian motion X _α,H (t)=X _H (S _α (t)), 0<α,H<1, driven by anomalous diffusions as a model of asset prices and discuss the corresponding fractional Fokker-Planck equation and Black-Scholes formula. We obtain the fractional Fokker-Planck equation governing the dynamics of the probability density function of the composite-diffusive fractional Brownian motion and find the Black-Scholes differential equation driven by the stock asset X _α,H (t) and the corresponding Black-Scholes formula for the fair prices of European option.     

Option Pricing in Subdiffusive Bachelier Model

The earliest model of stock prices based on Brownian diffusion is the Bachelier model. In this paper we propose an extension of the Bachelier model, which reflects the subdiffusive nature of the underlying asset dynamics. The subdiffusive property is manifested by the random (infinitely divisible) periods of time, during which the asset price does not change. We introduce a subdiffusive arithmetic Brownian motion as a model of stock prices with such characteristics. The structure of this process agrees with two-stage scenario underlying the anomalous diffusion mechanism, in which trapping random events are superimposed on the Langevin dynamics. We find the corresponding fractional Fokker-Planck equation governing the probability density function of the introduced process. We construct the corresponding martingale measure and show that the model is incomplete. We derive the formulas for European put and call option prices. We describe explicit algorithms and present some Monte-Carlo simulations for the particular cases of α-stable and tempered α-stable distributions of waiting times.     

Rigorous Estimates of the Tails of the Probability Distribution Function for the Random Linear Shear Model

In previous work Majda and McLaughlin, and Majda computed explicit expressions for the 2Nth moments of a passive scalar advected by a linear shear flow in the form of an integral over R ^N . In this paper we first compute the asymptotics of these moments for large moment number. We are able to use this information about the large-N behavior of the moments, along with some basic facts about entire functions of finite order, to compute the asymptotics of the tails of the probability distribution function. We find that the probability distribution has Gaussian tails when the energy is concentrated in the largest scales. As the initial energy is moved to smaller and smaller scales we find that the tails of the distribution grow longer, and the distribution moves smoothly from Gaussian through exponential and stretched exponential. We also show that the derivatives of the scalar are increasingly intermittent, in agreement with experimental observations, and relate the exponents of the scalar derivative to the exponents of the scalar.     

Quantum Brownian Motion on Non-Commutative Manifolds: Construction,Deformation and Exit Times

We begin with a review and analytical construction of quantum Gaussian process (and quantum Brownian motions) in the sense of Franz (The Theory of Quantum Levy Processes, [math.PR], 2009), Schürmann (White noise on bioalgebras. Volume 1544 of Lecture Notes in Mathematics. Berlin: Springer-Verlag, 1993) and others, and then formulate and study in details (with a number of interesting examples) a definition of quantum Brownian motions on those non-commutative manifolds (a la Connes) which are quantum homogeneous spaces of their quantum isometry groups in the sense of Goswami (Commun Math Phys 285(1):141–160, 2009). We prove that bi-invariant quantum Brownian motion can be ‘deformed’ in a suitable sense. Moreover, we propose a non-commutative analogue of the well-known asymptotics of the exit time of classical Brownian motion. We explicitly analyze such asymptotics for a specific example on non-commutative two-torus A_q{\mathcal{A}_\theta} , which seems to behave like a one-dimensional manifold, perhaps reminiscent of the fact that A_q{\mathcal{A}_\theta} is a non-commutative model of the (locally one-dimensional) ‘leaf-space’ of the Kronecker foliation.     

On Distributions of Functionals of Anomalous Diffusion Paths

Functionals of Brownian motion have diverse applications in physics, mathematics, and other fields. The probability density function (PDF) of Brownian functionals satisfies the Feynman-Kac formula, which is a Schrödinger equation in imaginary time. In recent years there is a growing interest in particular functionals of non-Brownian motion, or anomalous diffusion, but no equation existed for their PDF. Here, we derive a fractional generalization of the Feynman-Kac equation for functionals of anomalous paths based on sub-diffusive continuous-time random walk. We also derive a backward equation and a generalization to Lévy flights. Solutions are presented for a wide number of applications including the occupation time in half space and in an interval, the first passage time, the maximal displacement, and the hitting probability. We briefly discuss other fractional Schrödinger equations that recently appeared in the literature.     

SLE on Doubly-Connected Domains and the Winding of Loop-Erased Random Walks

Two-dimensional loop-erased random walks (LERWs) are random planar curves whose scaling limit is known to be a Schramm-Loewner evolution SLE _κ with parameter κ=2. In this note, some properties of an SLE _κ trace on doubly-connected domains are studied and a connection to passive scalar diffusion in a Burgers flow is emphasised. In particular, the endpoint probability distribution and winding probabilities for SLE₂ on a cylinder, starting from one boundary component and stopped when hitting the other, are found. A relation of the result to conditioned one-dimensional Brownian motion is pointed out. Moreover, this result permits to study the statistics of the winding number for SLE₂ with fixed endpoints. A solution for the endpoint distribution of SLE₄ on the cylinder is obtained and a relation to reflected Brownian motion pointed out.     

Asymptotics for the Wiener Sausage among Poissonian Obstacles

We consider the Wiener sausage among Poissonian obstacles. The obstacle is called hard if Brownian motion entering the obstacle is immediately killed, and is called soft if it is killed at certain rate. It is known that Brownian motion conditioned to survive among obstacles is confined in a ball near its starting point. We show the weak law of large numbers, large deviation principle in special cases and the moment asymptotics for the volume of the corresponding Wiener sausage. One of the consequence of our results is that the trajectory of Brownian motion almost fills the confinement ball.     

The application of fractional derivatives in stochastic models driven by fractional Brownian motion

In this paper, in order to establish connection between fractional derivative and fractional Brownian motion (FBM), we first prove the validity of the fractional Taylor formula proposed by Guy Jumarie. Then, by using the properties of this Taylor formula, we derive a fractional Itô formula for H∈[1/2,1), which coincides in form with the one proposed by Duncan for some special cases, whose formula is based on the Wick Product. Lastly, we apply this fractional Itô formula to the option pricing problem when the underlying of the option contract is supposed to be driven by a geometric fractional Brownian motion. The case that the drift, volatility and risk-free interest rate are all dependent on t is also discussed.     

Vibrations and Fractional Vibrations of Rods,Plates and Fresnel Pseudo-Processes

Different initial and boundary value problems for the equation of vibrations of rods (also called Fresnel equation) are solved by exploiting the connection with Brownian motion and the heat equation. The equation of vibrations of plates is considered and the case of circular vibrating disks C _R is investigated by applying the methods of planar orthogonally reflecting Brownian motion within C _R . The analysis of the fractional version (of order ν) of the Fresnel equation is also performed and, in detail, some specific cases, like ν=1/2, 1/3, 2/3, are analyzed. By means of the fundamental solution of the Fresnel equation, a pseudo-process F(t), t>0 with real sign-varying density is constructed and some of its properties examined. The composition of F with reflecting Brownian motion B yields the law of biquadratic heat equation while the composition of F with the first passage time T _t of B produces a genuine probability law strictly connected with the Cauchy process.     

Stieltjes Integrals of Hölder Continuous Functions with Applications to Fractional Brownian Motion

We give a new estimate on Stieltjes integrals of Hölder continuous functions and use it to prove an existence-uniqueness theorem for solutions of ordinary differential equations with Hölder continuous forcing. We construct stochastic integrals with respect to fractional Brownian motion, and establish sufficient conditions for its existence. We prove that stochastic differential equations with fractional Brownian motion have a unique solution with probability 1 in certain classes of Hölder-continuous functions. We give tail estimates of the maximum of stochastic integrals from tail estimates of the Hölder coefficient of fractional Brownian motion. In addition we apply the techniques used for ordinary Brownian motion to construct stochastic integrals of deterministic functions with respect to fractional Brownian motion and give tail estimates of its maximum.     

Small Values of the Maximum for the Integral of Fractional Brownian Motion

We consider the integral of fractional Brownian motion (IFBM) and its functionals ξ _T on the intervals (0,T) and (?T,T) of the following types: the maximum M _T , the position of the maximum, the occupation time above zero etc. We show how the asymptotics of P(ξ _T <1)=p _T ,T→∞, is related to the Hausdorff dimension of Lagrangian regular points for the inviscid Burgers equation with FBM initial velocity. We produce computational evidence in favor of a power asymptotics for p _T . The data do not reject the hypothesis that the exponent θ of the power law is related to the similarity parameter H of fractional Brownian motion as follows: θ=?(1?H) for the interval (?T,T) and θ=?H(1?H) for (0,T). The point 0 is special in that IFBM and its derivative both vanish there.     

The Weierstrass–Mandelbrot Process Revisited

We derive a functional central limit theorem for quasi-Gaussian processes. In particular, we prove that the limit of the Mandelbrot–Weierstrass process is a complex fractional Brownian motion.     

Persistence Probabilities of Two-Sided (Integrated) Sums of Correlated Stationary Gaussian Sequences

We study the persistence probability for some two-sided, discrete-time Gaussian sequences that are discrete-time analogues of fractional Brownian motion and integrated fractional Brownian motion, respectively. Our results extend the corresponding ones in continuous time in Molchan (Commun Math Phys 205(1):97–111, 1999) and Molchan (J Stat Phys 167(6):1546–1554, 2017) to a wide class of discrete-time processes.     

Supersymmetric Braneworld Inflation in Light of WMAP7 Observations

We consider a supersymmetric hybrid inflation in the framework of the Randall-Sundrum type-2 braneworld model. In particular, we study braneworld inflation in global supersymmetry with F-term and D-term. We show that we can solve partially the fine-tuning problem related to scalar fields coupling constants. We also derive all known spectrum inflationary parameters which are widely consistent with WMAP7, BAO and H ₀ data, whereas the scalar spectral index n _s >0.98 which lies outside of the range allowed by observations.     

Statistical Properties of the Burgers Equation with Brownian Initial Velocity

We study the one-dimensional Burgers equation in the inviscid limit for Brownian initial velocity (i.e. the initial velocity is a two-sided Brownian motion that starts from the origin x=0). We obtain the one-point distribution of the velocity field in closed analytical form. In the limit where we are far from the origin, we also obtain the two-point and higher-order distributions. We show how they factorize and recover the statistical invariance through translations for the distributions of velocity increments and Lagrangian increments. We also derive the velocity structure functions and we recover the bifractality of the inverse Lagrangian map. Then, for the case where the initial density is uniform, we obtain the distribution of the density field and its n-point correlations. In the same limit, we derive the n-point distributions of the Lagrangian displacement field and the properties of shocks. We note that both the stable-clustering ansatz and the Press-Schechter mass function, that are widely used in the cosmological context, happen to be exact for this one-dimensional version of the adhesion model.     

Multi-Scaling of the n-Point Density Function for Coalescing Brownian Motions

This paper gives a derivation for the large time asymptotics of the n-point density function of a system of coalescing Brownian motions on R.     

Stretching dynamics of semiflexible polymers

We analyze the nonequilibrium dynamics of single inextensible semiflexible biopolymers as stretching forces are applied at the ends. Based on different (contradicting) heuristic arguments, various scaling laws have been proposed for the propagation speed of the backbone tension which is induced in response to stretching. Here, we employ a newly developed unified theory to systematically substantiate, restrict, and extend these approaches. Introducing the practically relevant scenario of a chain equilibrated under some prestretching force f _pre that is suddenly exposed to a different external force f _ext at the ends, we give a concise physical explanation of the underlying relaxation processes by means of an intuitive blob picture. We discuss the corresponding intermediate asymptotics, derive results for experimentally relevant observables, and support our conclusions by numerical solutions of the coarse-grained equations of motion for the tension.     

A new thermal conductivity model for nanofluids

In a quiescent suspension, nanoparticles move randomly and thereby carry relatively large volumes of surrounding liquid with them. This micro-scale interaction may occur between hot and cold regions, resulting in a lower local temperature gradient for a given heat flux compared with the pure liquid case. Thus, as a result of Brownian motion, the effective thermal conductivity, k_eff, which is composed of the particles conventional static part and the Brownian motion part, increases to result in a lower temperature gradient for a given heat flux. To capture these transport phenomena, a new thermal conductivity model for nanofluids has been developed, which takes the effects of particle size, particle volume fraction and temperature dependence as well as properties of base liquid and particle phase into consideration by considering surrounding liquid traveling with randomly moving nanoparticles.The strong dependence of the effective thermal conductivity on temperature and material properties of both particle and carrier fluid was attributed to the long impact range of the interparticle potential, which influences the particle motion. In the new model, the impact of Brownian motion is more effective at higher temperatures, as also observed experimentally. Specifically, the new model was tested with simple thermal conduction cases, and demonstrated that for a given heat flux, the temperature gradient changes significantly due to a variable thermal conductivity which mainly depends on particle volume fraction, particle size, particle material and temperature. To improve the accuracy and versatility of the k_effmodel, more experimental data sets are needed.     

Neighborhood preferences in random matching problems

We consider a class of random matching problems where the distance between two points has a probability law which, for a small distance l, goes like l^r. In the framework of the cavity method, in the limit of an infinite number of points, we derive equations for p_k, the probability for some given point to be matched to its kth nearest neighbor in the optimal configuration. These equations are solved in two limiting cases: r = 0 -- where we recover p _k = 1/2^k, as numerically conjectured by Houdayer et al. and recently rigorously proved by Aldous -- and r→ + ∞. For 0 < r < + ∞, we are not able to solve the equations analytically, but we compute the leading behavior of p_k for large k. Received 14 February 2001