American Options in the Heston Model with Stochastic Interest Rate and Its Generalizations

Abstract

We consider the Heston model with the stochastic interest rate of Cox–Ingersoll–Ross (CIR) type and more general models with stochastic volatility and interest rates depending on two CIR-factors; the price, volatility and interest rate may correlate. Time-derivative and infinitesimal generator of the process for factors that determine the dynamics of the interest rate and/or volatility are discretized. The result is a sequence of embedded perpetual options arising in the time discretization of a Markov-modulated Lévy model. Options in this sequence are solved using an iteration method based on the Wiener–Hopf factorization. Typical shapes of the early exercise boundary are shown, and good agreement of option prices with prices calculated with the Longstaff–Schwartz method and Medvedev–Scaillet asymptotic method is demonstrated.     

Ink‐Jet Printed Nanoparticle Alignment Layers: Easy Design and Fabrication of Patterned Alignment Layers for Nematic Liquid Crystals

Ink‐jet printing of monolayer‐capped gold nanoparticles is introduced as a versatile and highly efficient means to pattern the alignment of nematic liquid crystals. Any homeotropic alignment patterns can be created quickly ranging in size from 30 μm (850 dpi) to several square inches, with high accuracy that does not deteriorate with time. Depending on the alignment underlayer, intermediate configurations between homeotropic and homogeneous are also feasible. Nematic liquid crystals with both positive and negative dielectric anisotropy can be switched by applying a DC or AC electric field in the printed vertical domains with the substrate configuration determining the electro‐optic response.     

Character sheaves on unipotent groups in positive characteristic: foundations

In this article we formulate and prove the main theorems of the theory of character sheaves on unipotent groups over an algebraically closed field of characteristic $p>0$ . In particular, we show that every admissible pair for such a group $G$ gives rise to an $\mathbb{L }$ -packet of character sheaves on $G$ and that conversely, every $\mathbb{L }$ -packet of character sheaves on $G$ arises from a (nonunique) admissible pair. In the Appendices we discuss two abstract category theory patterns related to the study of character sheaves. The first Appendix sketches a theory of duality for monoidal categories, which generalizes the notion of a rigid monoidal category and is close in spirit to the Grothendieck–Verdier duality theory. In the second one we use a topological field theory approach to define the canonical braided monoidal structure and twist on the equivariant derived category of constructible sheaves on an algebraic group; moreover, we show that this category carries an action of the surface operad. The third Appendix proves that the “naive” definition of the equivariant $\ell $ -adic derived category with respect to a unipotent algebraic group is equivalent to the “correct” one.     

On affine yangians

A Yangian , a deformation of the universal enveloping algebra of the two-dimensional loop algebra sl(2) C [t ^–1,t;u], is constructed. This deformation is an analogue of a Yangian which was constructed by V. Drinfeld for any simple Lie algebra. The PBW theorem for is proved and some representations are constructed. Like usual Yangians, possesses a one-dimensional group of auto- morphisms and at zero level - a two-dimensional group of automorphisms. This observation allows one to conjecture that the representation theory of should give rise to new solutions of QYBE.Yangians of other affine algebras can be constructed similarly and they enjoy similar properties.     

On abstract representations of the groups of rational points of algebraic groups in positive characteristic

We analyze the structure of a large class of connected algebraic rings over an algebraically closed field of positive characteristic using Greenberg’s perfectization functor. We then give applications to rigidity problems for representations of Chevalley groups.     

Optimal Stopping Problems in Lévy Models with Random Observations

In the standard optimal stopping problems, actions are artificially restricted to the moments of observations of costs or benefits. In the standard experimentation and learning models based on two-armed Poisson bandits, it is possible to take an action between two sequential observations. The latter models do not recognize the fact that timing decisions depend not only on the rate of arrival of observations, but also on the stochastic dynamics of costs or benefits. We combine these two strands of literature and consider optimal stopping problems with random observations and updating. We formulate the dichotomy principle, an extension of the smooth pasting principle.