Viscosity solutions and the pricing of European-style options in a Markov-modulated exponential Lévy model

ABSTRACT

In this paper, we investigate the pricing problem of a European-style contingent claim under a Markov-modulated exponential Lévy model. One of the main feature of this model is the modulator factor which takes into account the empirical facts observed in asset prices dynamics such as the long-term (stochastic) variability and time inhomogeneities. Using the viscosity solutions framework, we show that the value of a European-style option is the unique viscosity solution of a system of coupled linear Partial Integro-Differential Equations when the payoff function satisfies a Lipschitz condition. Moreover, we propose a numerical scheme for approximating solution of this system and discuss its stability, consistency and convergence.     

Finite dimensional filter systems in discrete time

Under regularity conditions, a finite dimensional filter system exists for a partially observable process if and only if the conditional distributions involved each form an exponential family of distributions. The filter equation can be derived directly from the exponential representations of these families.     

The nisio semigroup for controlled diffusions with partial observations

A one parameter semigroup of nonlinear operators on an appropriate Banach space is constructed in the spirit of Nisio for controlled diffusions with partial observations. The method is based upon considering an equivalent problem of controlling a measure-valued process representing the conditional law of the state given past observations. The latter evolves according to the usual equations of nonlinear filtering. By considering an appropriate augmentation of the class of controls, it is shown that the “minimum cost” operators associated with this control problem indeed form a semigroup of nonlinear contractions on the space of bounded continuous real-valued functions on the state space of the above measure-valued process.     

On the construction of nearly optimal strategies for a general problem of control of partially observed diffusions

In the paper a stochastic control problem consisting of continuously acting controls, impulse controls and stopping times of a partially observed diffusion with discounted cost functional is considered. The problem is successively approximated by time, observation, control and space discretizations to obtain finally a completely observed finite valued control problem. It is shown that the optimal strategy for the approximating problem, which can be numerically computed, is nearly optimal for the original problem     

Statistical properties of subgroups of free groups

The usual way to investigate the statistical properties of finitely generated subgroups of free groups, and of finite presentations of groups, is based on the so‐called word‐based distribution: subgroups are generated (finite presentations are determined) by randomly chosen k ‐tuples of reduced words, whose maximal length is allowed to tend to infinity. In this paper we adopt a different, though equally natural point of view: we investigate the statistical properties of the same objects, but with respect to the so‐called graph‐based distribution, recently introduced by Bassino, Nicaud and Weil. Here, subgroups (and finite presentations) are determined by randomly chosen Stallings graphs whose number of vertices tends to infinity. Our results show that these two distributions behave quite differently from each other, shedding a new light on which properties of finitely generated subgroups can be considered frequent or rare. For example, we show that malnormal subgroups of a free group are negligible in the graph‐based distribution, while they are exponentially generic in the word‐based distribution. Quite surprisingly, a random finite presentation generically presents the trivial group in this new distribution, while in the classical one it is known to generically present an infinite hyperbolic group. © 2012 Wiley Periodicals, Inc. Random Struct. Alg., 2013     

双参数 C-半群

引入单参数C-半群和双参数C0-半群,给出了更一般的双参数C-半群和无穷小生成元的定义,应用双参数半群与单参数半群的关系和双参数半群的性质,给出了双参数C-半群的阶全微分,偏微分,指数有界性,和双参数C-半群是由C、A1和A2唯一确定的闭稠定线性算子的一个充分条件.     

A note on a three-point partial difference equation with variable coefficients

The explicit solution of four-point linear partial difference equations, provided with variable coefficients and with boundary conditions including the independent variables, was found in a previous note. In addition, the note explained the procedure to be used in case of boundary conditions also including the dependent variables. The aim of this note is to determine the explicit solution of a three-point equation of the above-mentioned second type, encountered in the study of differential difference equations with the method of the steps.     

Existence of solutions to second-order nonlinear discrete elliptic equations

In this paper, we consider a boundary value problem (BVP) for second-order nonlinear partial difference equations on finite lattice domains. Some conditions are established that ensure existence and uniqueness of solutions to the BVP under consideration.