Maximum Principle for Risk-Sensitive Stochastic Optimal Control Problem and Applications to Finance

This article is concerned with a risk-sensitive stochastic optimal control problem motivated by a kind of optimal portfolio choice problem in the financial market. The maximum principle for this kind of problem is obtained, which is similar in form to its risk-neutral counterpart. But the adjoint equations and maximum condition heavily depend on the risk-sensitive parameter. This result is used to solve a kind of optimal portfolio choice problem and the optimal portfolio choice strategy is obtained. Computational results and figures explicitly illustrate the optimal solution and the sensitivity to the volatility rate parameter.     

An expanded mixed covolume method for sobolev equation with convection term on triangular grids

The expanded mixed covolume method for the two‐dimensional Sobolev equation with convection term is developed and studied. This method uses the lowest‐order Raviart‐Thomas mixed finite element space as the trial function space. By introducing a transfer operator γ_h which maps the trial function space into the test function space and combining expanded mixed finite element with mixed covolume method, the continuous‐in‐time, discrete‐in‐time expanded mixed covolume schemes are constructed, and optimal error estimates for these schemes are obtained. Numerical results are given to examine the validity and effectiveness of the proposed schemes.© 2012 Wiley Periodicals, Inc. Numer Methods Partial Differential Eq, 2013     

ON THE SUSTAINABLE GROWTH IN AN ECONOMY WITH PERFECTLY SUBSTITUTABLE EXHAUSTIBLE RESOURCES

Abstract A model of sustainable economic growth in an economy with two types of exhaustible resources is analyzed. The resources are assumed to be perfect substitutes with marginal rate of substitution varying over time. The optimal control framework is used to characterize the optimal paths under the maximin criterion. It is shown that the resource with increasing productivity is not used before the constant productivity resource is depleted. Afterwards the resource with an increasing productivity is asymptotically depleted as well. The results are based on an assumption that transversality conditions hold. A new sufficient condition for the transversality conditions is derived. Finally, an analogue of Hartwick’s rule for this non‐autonomous case is established.     

A self-adaptive stochastic resonance system design and study in chaotic interference

The us of stochastic resonance （SR） can effectively achieve the detection of weak signal in white noise and colored noise. However, SR in chaotic interference is seldom involved. In view of the requirements for the detection of weak signal in the actual project and the relationship between the signal, chaotic interference, and nonlinear system in the bistable system, a self-adaptive SR system based on genetic algorithm is designed in this paper. It regards the output signal-to-noise ratio （SNR） as a fitness function and the system parameters are jointly encoded to gain optimal bistable system parameters, then the input signal is processed in the SR system with the optimal system parameters. Experimental results show that the system can keep the best state of SR under the condition of low input SNR, which ensures the effective detection and process of weak signal in low input SNR.     

New approach to Q-P （P-Q） ordering of quantum mechanical operators and its applications

In this paper, we introduce a new way to obtain the Q-P （P-Q） ordering of quantum mechanical operators, i.e., from the classical correspondence of Q-P （P-Q） ordered operators by replacing q and p with coordinate and momentum operators, respectively. Some operator identities are derived concisely. As for its applications, the single （two-） mode squeezed operators and Fresnel operator are examined. It is shown that the classical correspondence of Fresnel operator’s Q-P （P-Q） ordering is just the integration kernel of Fresnel transformation. In addition, a new photo-counting formula is constructed by the Q-P ordering of operators.     

Study of oxygen vacancy ordering in mullite at high temperatures

High temperature X-ray diffraction and quenching experiments of mullite single crystals with Al₂O₃:SiO₂ ratio 2:1 have been performed to investigate the stability of the oxygen vacancy ordering close to the melting point of mullite. The experiments show that the structure of mullite exhibits an extremely stable, temperature-independent incommensurate modulation. Inspection of satellite reflections at different temperatures leads to the conclusion that the ordering scheme of oxygen vacancies after the crystallization of mullite persists to the melting point and does not show any disordering effects. The experimental results are in agreement with former theoretical calculations using a statistical mechanics approach which yield the critical temperature T_c > 3000°C.     

An inventory model for increasing demand under two levels of trade credit linked to order quantity

During the growth stage of a product life cycle especially for high-tech products, the demand function increases with time. In this paper, we extend the constant demand to a linear non-decreasing demand function of time and incorporate a permissible delay in payment under two levels of trade credit into the model. The supplier offers a permissible delay linked to order quantity, and the retailer also provides a downstream trade credit period to its customers. The objective is to find the optimal replenishment cycle that minimizes the retailer’s annual total relevant cost per unit time. The condition for an optimal solution to the generalized model is presented and some fundamental theoretical results are established. Finally, numerical examples to illustrate the proposed model are provided. Sensitivity analysis is performed and some relevant managerial insights are obtained.     

No Arbitrage and the Growth Optimal Portfolio

Abstract

Recently, several papers have expressed an interest in applying the Growth Optimal Portfolio (GOP) for pricing derivatives. We show that the existence of a GOP is equivalent to the existence of a strictly positive martingale density. Our approach circumvents two assumptions usually set forth in the literature: 1) infinite expected growth rates are permitted and 2) the market does not need to admit an equivalent martingale measure. In particular, our approach shows that models featuring credit constrained arbitrage may still allow a GOP to exist because this type of arbitrage can be removed by a change of numéraire. However, if the GOP exists the market admits an equivalent martingale measure under some numéraire and hence derivatives can be priced. The structure of martingale densities is used to provide a new characterization of the GOP which emphasizes the relation to other methods of pricing in incomplete markets. The case where GOP denominated asset prices are strict supermartingales is analyzed in the case of pure jump driven uncertainty.     

对称广义中心对称半正定矩阵模型修正的矩阵逼近法及其应用

设X,B分别是实测的位移矩阵和载荷矩阵, C是有限元模型估计,找对称广义中心对称半正定矩阵(A)使‖C-(A)‖F=min(A:AX=B)‖C-A‖F.我们证明这样的(A)存在唯一,并应用它来修正动力模型.数值结果证明方法是行之有效的.