Asymptotic analysis of option pricing in a Markov modulated market

We address asymptotic analysis of option pricing in a regime switching market where the risk free interest rate, growth rate and the volatility of the stocks depend on a finite state Markov chain. We study two variations of the chain namely, when the chain is moving very fast compared to the underlying asset price and when it is moving very slow. Using quadratic hedging and asymptotic expansion, we derive corrections on the locally risk minimizing option price.

Two-temperature accretion around rotating black holes: a description of the general advective flow paradigm in the presence of various cooling processes to explain low to high luminous sources

We investigate viscous two-temperature accretion disc flows around rotating black holes. We describe the global solution of accretion flows with a sub-Keplerian angular momentum profile, by solving the underlying conservation equations including explicit cooling processes self-consistently. Bremsstrahlung, synchrotron and inverse Comptonization of soft photons are considered as possible cooling mechanisms. We focus on the set of solutions for sub-Eddington, Eddington and super-Eddington mass accretion rates around Schwarzschild and Kerr black holes with a Kerr parameter of 0.998. It is found that the flow, during its infall from the Keplerian to sub-Kepleria transition region to the black hole event horizon, passes through various phases of advection: the general advective paradigm to the radiatively inefficient phase, and vice versa. Hence, the flow governs a much lower electron temperature similar to 10(8)-10(9.5) K, in the range of accretion rate in Eddington units 0.01 less than or similar to (M) over dot less than or similar to 100, compared to the hot protons of temperature similar to 10(10.2)-10(11.8) K. Therefore, the solution may potentially explain the hard X-rays and gamma-rays emitted from active galactic nuclei (AGNs) and X-ray binaries. We then compare the solutions for two different regimes of viscosity. We conclude that a weakly viscous flow is expected to be cooling dominated, particularly at the inner region of the disc, compared to its highly viscous counterpart, which is radiatively inefficient. With all the solutions in hand, we finally reproduce the observed luminosities of the underfed AGNs and quasars (e. g. Sgr A*) to ultraluminous X-ray sources (e. g. SS433), at different combinations of input parameters, such as the mass accretion rate and the ratio of specific heats. The set of solutions also predicts appropriately the luminosity observed in highly luminous AGNs and ultraluminous quasars (e. g. PKS 0743-67).

Effects of compressibility and heat release on entrainment processes in mixing layers

Characteristics of the process of entrainment in plane mixing layers, and the changes with compressibility and heat release, were studied using temporal DNS with simultaneous fluid packet tracking. Convective Mach numbers of the simulations are 0.15, 0.7 and 1.1. The Reynolds number is quite high (between 11 000 and 37 000 based on layer width and velocity difference), and is above the mixing transition. The study agrees with recent findings in round jets: first, engulfed fluid volume and its growth rate are both very small compared with the volume of the turbulent region and its growth rate, respectively. Secondly, most often, the process occurs close to the turbulent-nonturbulent boundaries. A new finding is that both compressibility and heat release retard the entrainment process so that it takes an O(1) time for vorticity or scalar levels to grow even after growth has been initiated. This delay is manifested as the fall in mixing layer growth rates as compressibility and heat release levels increase.

Electrical switching and in situ Raman scattering studies on the set-reset processes in Ge-Te-Si glass

Bulk Ge15Te83Si2 glass has been found to exhibit memory-type switching for 1 mA current with a threshold electric field of 7.3 kV/cm. The electrical set and reset processes have been achieved with triangular and rectangular pulses, respectively, of 1 mA amplitude. In situ Raman scattering studies indicate that the degree of disorder in Ge15Te83Si2 glass is reduced from off to set state. The local structure of the sample under reset condition is similar to that in the off state. The Raman results are consistent with the switching results which indicate that the Ge15Te83Si2 glass can be set and reset easily. (C) 2007 American Institute of Physics.

Dynamic simulation of activated sludge based wastewater treatment processes: Case studies with Titagarh Sewage Treatment Plant, India

STOAT has been extensively used for the dynamic simulation of an activated sludge based wastewater treatment plant in the Titagarh Sewage Treatment Plant, near Kolkata, India. Some alternative schemes were suggested. Different schemes were compared for the removal of Total Suspended Solids (TSS), b-COD, ammonia, nitrates etc. A combination of IAWQ#1 module with the Takacs module gave best results for the existing scenarios of the Titagarh Sewage Treatment Plant. The modified Bardenpho process was found most effective for reducing the mean b-COD level to as low as 31.4 mg/l, while the mean TSS level was as high as 100.98 mg/l as compared to the mean levels of TSS (92 62 mg/l) and b-COD (92.0 mg/l) in the existing plant. Scheme 2 gave a better scenario for the mean TSS level bringing it down to a mean value of 0.4 mg/l, but a higher mean value for the b-COD level at 54.89 mg/l. The Scheme Final could reduce the mean TSS level to 2.9 mg/l and the mean b-COD level to as low as 38.8 mg/l. The Final Scheme looks to be a technically viable scheme with respect to the overall effluent quality for the plant. (C) 2009 Elsevier B.V. All rights reserved.

Parametrized actor-critic algorithms for finite-horizon MDPs

Due to their non-stationarity, finite-horizon Markov decision processes (FH-MDPs) have one probability transition matrix per stage. Thus the curse of dimensionality affects FH-MDPs more severely than infinite-horizon MDPs. We propose two parametrized 'actor-critic' algorithms to compute optimal policies for FH-MDPs. Both algorithms use the two-timescale stochastic approximation technique, thus simultaneously performing gradient search in the parametrized policy space (the 'actor') on a slower timescale and learning the policy gradient (the 'critic') via a faster recursion. This is in contrast to methods where critic recursions learn the cost-to-go proper. We show w.p 1 convergence to a set with the necessary condition for constrained optima. The proposed parameterization is for FHMDPs with compact action sets, although certain exceptions can be handled. Further, a third algorithm for stochastic control of stopping time processes is presented. We explain why current policy evaluation methods do not work as critic to the proposed actor recursion. Simulation results from flow-control in communication networks attest to the performance advantages of all three algorithms.

Control aspects in proportionality Markov manpower systems

In this paper, the control aspects of a hierarchical organization under the influence of "proportionality" policies are analyzed. Proportionality policies are those that restrict the recruitment to every level of the hierarchy (except the bottom most level or base level) to be in strict proportion to the promotions into that level. Both long term and short term control analysis have been discussed. In long term control the specific roles of the parameters of the system with regard to control of the shape and size of the system have been analyzed and yield suitable control strategies. In short term control, the attainability of a target or goal structure within a specific time from a given initial structure has been analyzed and yields the required recruitment strategies. The theoretical analyses have been illustrated with computational examples and also with real world data.

Solving MDPs using two-timescale simulated annealing with multiplicative weights

We develop extensions of the Simulated Annealing with Multiplicative Weights (SAMW) algorithm that proposed a method of solution of Finite-Horizon Markov Decision Processes (FH-MDPs). The extensions developed are in three directions: a) Use of the dynamic programming principle in the policy update step of SAMW b) A two-timescale actor-critic algorithm that uses simulated transitions alone, and c) Extending the algorithm to the infinite-horizon discounted-reward scenario. In particular, a) reduces the storage required from exponential to linear in the number of actions per stage-state pair. On the faster timescale, a 'critic' recursion performs policy evaluation while on the slower timescale an 'actor' recursion performs policy improvement using SAMW. We give a proof outlining convergence w.p. 1 and show experimental results on two settings: semiconductor fabrication and flow control in communication networks.

Delay optimal control algorithm for a multiaccess fading channel with peak power constraint

We consider an optimal power and rate scheduling problem for a multiaccess fading wireless channel with the objective of minimising a weighted sum of mean packet transmission delay subject to a peak power constraint. The base station acts as a controller which, depending upon the buffer lengths and the channel state of each user, allocates transmission rate and power to individual users. We assume perfect channel state information at the transmitter and the receiver. We also assume a Markov model for the fading and packet arrival processes. The policy obtained represents a form of Indexability.

Solution of MDPS using simulation-based value iteration

This article proposes a three-timescale simulation based algorithm for solution of infinite horizon Markov Decision Processes (MDPs). We assume a finite state space and discounted cost criterion and adopt the value iteration approach. An approximation of the Dynamic Programming operator T is applied to the value function iterates. This 'approximate' operator is implemented using three timescales, the slowest of which updates the value function iterates. On the middle timescale we perform a gradient search over the feasible action set of each state using Simultaneous Perturbation Stochastic Approximation (SPSA) gradient estimates, thus finding the minimizing action in T. On the fastest timescale, the 'critic' estimates, over which the gradient search is performed, are obtained. A sketch of convergence explaining the dynamics of the algorithm using associated ODEs is also presented. Numerical experiments on rate based flow control on a bottleneck node using a continuous-time queueing model are performed using the proposed algorithm. The results obtained are verified against classical value iteration where the feasible set is suitably discretized. Over such a discretized setting, a variant of the algorithm of [12] is compared and the proposed algorithm is found to converge faster.

Control aspects in proportionality Markov manpower systems

In this paper, the control aspects of a hierarchical organization under the influence of "proportionality" policies are analyzed. Proportionality policies are those that restrict the recruitment to every level of the hierarchy (except the bottom most level or base level) to be in strict proportion to the promotions into that level. Both long term and short term control analysis have been discussed. In long term control the specific roles of the parameters of the system with regard to control of the shape and size of the system have been analyzed and yield suitable control strategies. In short term control, the attainability of a target or goal structure within a specific time from a given initial structure has been analyzed and yields the required recruitment strategies. The theoretical analyses have been illustrated with computational examples and also with real world data. The control of such proportionality systems is then compared with that of the general systems (which do not follow such policies) with some significant conclusions. The control relations of such proportionality systems are found to be simpler and more practically feasible than those of general Markov systems, which do not have such restrictions. Such proportionality systems thus not only retain and match the flexibility of general Markov systems but also have the added advantage of simpler and more practically feasible controls. The proportionality policies hence act as an alternative and more practicably feasible means of control. (C) 2004 Elsevier Inc. All rights reserved.

Generalization of Dynkin's Identity and Some Applications

Let X(t) be a right continuous temporally homogeneous Markov pro- cess, Tt the corresponding semigroup and A the weak infinitesimal genera- tor. Let g(t) be absolutely continuous and r a stopping time satisfying E.( S f I g(t) I dt) < oo and E.( f " I g'(t) I dt) < oo Then for f e 9iJ(A) with f(X(t)) right continuous the identity Exg(r)f(X(z)) - g(O)f(x) = E( 5 " g'(s)f(X(s)) ds) + E.( 5 " g(s)Af(X(s)) ds) is a simple generalization of Dynkin's identity (g(t) 1). With further restrictions on f and r the following identity is obtained as a corollary: Ex(f(X(z))) = f(x) + k! Ex~rkAkf(X(z))) + n-1E + (n ) )!.E,(so un-1Anf(X(u)) du). These identities are applied to processes with stationary independent increments to obtain a number of new and known results relating the moments of stopping times to the moments of the stopped processes.

Markov Chain Model for Cracking Behavior of Reinforced Concrete Beams

In this paper, nonhomogeneous Markov chains are proposed for modeling the cracking behavior of reinforced concrete beams subjected to monotonically increasing loads. The model facilitates prediction of the maximum crackwidth at a given load given the crackwidth at a lower load level, and thus leads to a better understanding of the cracking phenomenon. To illustrate the methodology developed, the results of three reinforced concrete beams tested in the laboratory are analyzed and presented.