Unit-linked life insurance policies: Optimal hedging in partially observable market models

In this paper we investigate the hedging problem of a unit-linked life insurance contract via the local risk-minimization approach, when the insurer has a restricted information on the market. In particular, we consider an endowment insurance contract, that is a combination of a term insurance policy and a pure endowment, whose final value depends on the trend of a stock market where the premia the policyholder pays are invested. To allow for mutual dependence between the financial and the insurance markets, we use the progressive enlargement of filtration approach. We assume that the stock price process dynamics depends on an exogenous unobservable stochastic factor that also influences the mortality rate of the policyholder. We characterize the optimal hedging strategy in terms of the integrand in the Galtchouk–Kunita–Watanabe decomposition of the insurance claim with respect to the minimal martingale measure and the available information flow. We provide an explicit formula by means of predictable projection of the corresponding hedging strategy under full information with respect to the natural filtration of the risky asset price and the minimal martingale measure. Finally, we discuss applications in a Markovian setting via filtering.     

Coupling and exponential ergodicity for stochastic differential equations driven by Lévy processes

We present a novel idea for a coupling of solutions of stochastic differential equations driven by Lévy noise, inspired by some results from the optimal transportation theory. Then we use this coupling to obtain exponential contractivity of the semigroups associated with these solutions with respect to an appropriately chosen Kantorovich distance. As a corollary, we obtain exponential convergence rates in the total variation and standard $L^1$-Wasserstein distances.     

On stationary Markov processes with polynomial conditional moments

We study a class of stationary Markov processes with marginal distributions identifiable by moments such that every conditional moment of degree say m is a polynomial of degree at most m. We show that then under some additional, natural technical assumption there exists a family of orthogonal polynomial martingales. More precisely we show that such a family of processes is completely characterized by the sequence {(α_n, p_n)}_{n ? 0} where α′_ns are some positive reals while p′_ns are some monic orthogonal polynomials. Bakry and Mazet (Séminaire de Probabilit?s, vol. 37, 2003) showed that under some additional mild technical conditions each such sequence generates some stationary Markov process with polynomial regression.

We single out two important subclasses of the considered class of Markov processes. The class of harnesses that we characterize completely. The second one constitutes of the processes that have independent regression property and are stationary. Processes with independent regression property so to say generalize ordinary Ornstein–Uhlenbeck (OU) processes or can also be understood as time scale transformations of Lévy processes. We list several properties of these processes. In particular we show that if these process are time scale transforms of Lévy processes then they are not stationary unless we deal with classical OU process. Conversely, time scale transformations of stationary processes with independent regression property are not Lévy unless we deal with classical OU process.     

On the construction of non-affine jump-diffusion models

We describe a method for construction of jump analogues of certain one-dimensional diffusion processes satisfying solvable stochastic differential equations. The method is based on the reduction of the original stochastic differential equations to the ones with linear diffusion coefficients, which are reducible to the associated ordinary differential equations, by using the appropriate integrating factor processes. The analogues are constructed by means of adding the jump components linearly into the reduced stochastic differential equations. We illustrate the method by constructing jump analogues of several diffusion processes and expand the notion of market price of risk to the resulting non-affine jump-diffusion models.     

Lowest priority waiting time distribution in an accumulating priority Lévy queue

We derive the waiting time distribution of the lowest class in an accumulating priority (AP) queue with positive Lévy input. The priority of an infinitesimal customer (particle) is a function of their class and waiting time in the system, and the particles with the highest AP are the next to be processed. To this end we introduce a new method that relies on the construction of a workload overtaking process and solving a first-passage problem using an appropriate stopping time.     

Existence and uniqueness of perturbed reflected jump diffusion processes

In this article, we establish the existence of the solution to the càdlàg perturbed Skorohod problem. As an application, we obtain the existence and uniqueness of the solution to the perturbed reflected jump diffusion processes.     

Measurement of the Dynamic Characteristics of Soft Soils Using the Kolsky Method

A modified Kolsky method for dynamic tests of soft soils in an elastic holder is analyzed. It is shown the axial and radial stresses in the sample are uniform. The rational geometry of the holder is determined. Friction is found to have an effect on the dynamic strain diagram obtained. It is suggested that this effect can be reduced by lubricating the inner surface of the holder.     

Similarity Solutions for Thawing Processes with a Heat Flux Condition at the Fixed Boundary

Similarity solutions for a mathematical model for thawing in a saturated semi-infinite porous medium is considered when change of phase induces a density jump and a heat flux condition of the type is imposed on the fixed face x=0. Different cases depending on physical parameters are analysed and the explicit solution is obtained if and only if an inequality for the thermal coefficient q ₀ is verified. An improvement for the existence of a similarity solution for the same free boundary problem with a constant temperature on the fixed face x=0 is also obtained. Sommario. Vengono considerate soluzioni di similarità per un modello matematico di disgelo di un mezzo poroso saturo semi-infinito allorquando il cambiamento di fase induce un salto di densità ed una condizione di flusso di calore del tipo viene imposta sulla faccia fissa x=0. Si analizzano differenti casi dipendenti da parametri fisici e la soluzione esplicita viene ottenuta se e solo se risulta verificata una diseguaglianzo per il coefficiente termico q ₀. Si ottiene altresi un miglioramento della condizione di esistenza di una soluzione di similarità per lo stesso problema al contorno libero con temperatura costante sulla faccia fissa x=0.     

Phase Interaction in a Vapor-Liquid Medium in Transient Flow Regimes

A mathematical model and a numerical method are developed for studying nonlinear wave processes in two-phase liquids with gas or vapor bubbles under conditions of impact interaction with deformable media. On the basis of the proposed approach to the numerical modeling of the dynamics of the transient processes in the two-phase vapor-liquid and deformable media, the basic features of the phase behavior, the phase transitions, and the interphase heat and mass transfer, typical of liquids containing vapor bubbles, are analyzed. The results of solving problems of the dynamics of different vapor-liquid media are presented.__________Translated from Izvestiya Rossiiskoi Academii Nauk, Mekhanika Zhidkosti i Gaza, No. 3, 2005, pp. 88–102.Original Russian Text Copyright © 2005 by Petushkov.     

Short-term microdamage of a physically nonlinear particulate material under a combination of normal and tangential loads

The structural theory of short-term damage is generalized to the case where the undamaged components of a particulate composite deform nonlinearly under loads that induce a compound stress state. The basis for this generalization is the stochastic elasticity equations for a particulate composite with porous components whose skeletons deform nonlinearly. Damage in a microvolume of the material is assumed to occur in accordance with the Huber-Mises failure criterion. Balance equations for damaged microvolume are derived for the physically nonlinear materials of the components. Together with the macrostress-macrostrain relationship for a particulate composite with porous nonlinear components, they constitute a closed-form system of equations. This system describes the coupled processes of physically nonlinear deformation and microdamage. Algorithms for calculating the microdamage-macrostrain relationship and plotting stress-strain curves are proposed. Such curves are plotted for the case where the composite is subjected to a combination of normal and tangential loads, and microdamages occur in the linearly hardened matrix and do not in the linearly elastic inclusions. The stress-strain curves are examined depending on the volume fraction of inclusions and presence of tangential stresses __________ Translated from Prikladnaya Mekhanika, Vol. 42, No. 12, pp. 48–57, December, 2006.