Risk Minimizing Option Pricing for a Class of Exotic Options in a Markov-Modulated Market

We address risk minimizing option pricing in a regime switching market where the floating interest rate depends on a finite state Markov process. The growth rate and the volatility of the stock also depend on the Markov process. Using the minimal martingale measure, we show that the locally risk minimizing prices for certain exotic options satisfy a system of Black-Scholes partial differential equations with appropriate boundary conditions. We find the corresponding hedging strategies and the residual risk. We develop suitable numerical methods to compute option prices.

Influence of crack tip constraint on void growth in ductile FCC single crystals

Effect of constraint (stress triaxiality) on void growth near a notch tip in a FCC single crystal is investigated. Finite element simulations within the modified boundary layer framework are conducted using crystal plasticity constitutive equations and neglecting elastic anisotropy. Displacement boundary conditions based on model, elastic, two term K-T field are applied on the outer boundary of a large circular domain. A pre-nucleated void is considered ahead of a stationary notch tip. The interaction between the notch tip and the void is studied under different constraints (T-stress levels) and crystal orientations. It is found that negative T-stress retards the mechanisms of ductile fracture. However, the extent of retardation depends on the crystal orientation. Further, it is found that there exists a particular orientation which delays the ductile fracture processes and hence can potentially improve ductility. This optimal orientation depends on the constraint level. (C) 2010 Published by Elsevier B.V.

Applicability of Butler's equation in interpreting the thermodynamic behavior of surfaces and adsorption in Fe-S-O melts

Expressions for various second-order derivatives of surface tension with respect to composition at infinite dilution in terms of the interaction parameters of the surface and those of the bulk phases of dilute ternary melts have been presented. A method of deducing the parameters, which consists of repeated differentiation of Butler's equations with subsequent application of the appropriate boundary conditions, has been developed. The present investigation calculates the surface tension and adsorption functions of the Fe-S-O melts at 1873 and 1923 K using the modified form of Butler's equations and the derived values for the surface interaction parameters of the system. The calculated values are found to be in good agreement with those of the experimental data of the system. The present analysis indicates that the energetics of the surface phase are considerably different from those of the bulk phase. The present research investigates a critical compositional range beyond which the surface tension increases with temperature. The observed increase in adsorption of sulfur with consequent desorption of oxygen as a function of temperature above the critical compositional range has been ascribed to the increase of activity ratios of oxygen to sulfur in the surface relative to those in the bulk phase of the system.

Integral treatment for the representation of thermodynamic properties in multicomponent systems using interaction parameters

The partial thermodynamic functions of the solvent component of a ternary system have been deduced in terms of the interaction parameters by integration of several series which emerge from the Maclaurin infinite series based on the integral property of the system and subjected to appropriate boundary conditions. The series integration shows that the resulting partial functions are suitable for interpreting the thermodynamic properties of the system and are independent of compositional paths. In the present analysis, the higher order terms of these series are found to make insignificant contributions.

Breakage of a drop of inviscid fluid due to a pressure fluctuation at its surface

In this work, an attempt is made to gain a better understanding of the breakage of low-viscosity drops in turbulent flows by determining the dynamics of deformation of an inviscid drop in response to a pressure variation acting on the drop surface. Known scaling relationships between wavenumbers and frequencies, and between pressure fluctuations and velocity fluctuations in the inertial subrange are used in characterizing the pressure fluctuation. The existence of a maximum stable drop diameter d(max) follows once scaling laws of turbulent flow are used to correlate the magnitude of the disruptive forces with the duration for which they act. Two undetermined dimensionless quantities, both of order unity, appear in the equations of continuity, motion, and the boundary conditions in terms of pressure fluctuations applied on the surface. One is a constant of proportionality relating root-mean-square values of pressure and velocity differences between two points separated by a distance l. The other is a Weber number based on turbulent stresses acting on the drop and the resisting stresses in the drop due to interfacial tension. The former is set equal to 1, and the latter is determined by studying the interaction of a drop of diameter equal to d(max) with a pressure fluctuation of length scale equal to the drop diameter. The model is then used to study the breakage of drops of diameter greater than d(max) and those with densities different from that of the suspending fluid. It is found that, at least during breakage of a drop of diameter greater than d(max) by interaction with a fluctuation of equal length scale, a satellite drop is always formed between two larger drops. When very large drops are broken by smaller-length-scale fluctuations, highly deformed shapes are produced suggesting the possibility of further fragmentation due to instabilities. The model predicts that as the dispersed-phase density increases, d(max) decreases.

Obliquely incident water waves against a vertical cliff

Utilizing the commutativity property of the Cartesian coordinate differential operators arising in the boundary conditions associated with the propagation of surface water waves against a vertical cliff, under the assumptions of linearized theory, the problem of obliquely incident surface waves is considered for solution. The case of normal incidence, handled by previous workers follow as a particular limiting case of the present problem, which exhibits a source/sink type behavior of the velocity potential at the shore-line. An independent method of attack is also presented to handle the case of normal incidence.

Derivation and consistency of the partial functions of the ternary system involving interaction coefficients

The logarithm of activity coefficients of the components of the ternary system is derived based on the Maclaurin infinite series, which is expressed in terms of the integral property of the system and subjected to appropriate boundary conditions. The derivation of the functions involves extensive summation of various infinite series pertaining to the first-order interaction coefficients that have been shown completely to remove any truncational error. Since the conventional equations involving interaction coefficients are internally inconsistent, a consistent form of the partial functions is developed in the article using the technique just described. The thermodynamic consistency of the functions based on the Maxwell and the Gibbs-Duhem relations has been established. The derived values of the logarithmic activity coefficients of the components have been found to be in agreement with the thermodynamic data of the Fe-Cr-Ni system at 1873 K and have been found to be independent of the compositional paths.

Stability analysis of stochastically parametered nonconservative columns

Nonconservatively loaded columns. which have stochastically distributed material property values and stochastic loadings in space are considered. Young's modulus and mass density are treated to constitute random fields. The support stiffness coefficient and tip follower load are considered to be random variables. The fluctuations of external and distributed loadings are considered to constitute a random field. The variational formulation is adopted to get the differential equation and boundary conditions. The non self-adjoint operators are used at the boundary of the regularity domain. The statistics of vibration frequencies and modes are obtained using the standard perturbation method, by treating the fluctuations to be stochastic perturbations. Linear dependence of vibration and stability parameters over property value fluctuations and loading fluctuations are assumed. Bounds for the statistics of vibration frequencies are obtained. The critical load is first evaluated for the averaged problem and the corresponding eigenvalue statistics are sought. Then, the frequency equation is employed to transform the eigenvalue statistics to critical load statistics. Specialization of the general procedure to Beck, Leipholz and Pfluger columns is carried out. For Pfluger column, nonlinear transformations are avoided by directly expressing the critical load statistics in terms of input variable statistics.

Stability of laminated composite plates with cut-outs

Critical buckling loads of laminated fibre-reinforced plastic square panels have been obtained using the finite element method. Various boundary conditions, lay-up details, fibre orientations, cut-out sizes are considered. A 36 degrees of freedom triangular element, based on the classical lamination theory (CLT) has been used for the analysis. The performance of this element is validated by comparing results with some of those available in literature. New results have been given for several cases of boundary conditions for [0°/ ± 45°/90°]s laminates. The effect of fibre-orientation in the ply on the buckling loads has been investigated by considering [±?]6s laminates.

Stability of stochastic Leipholz column with stochastic loading

The Leipholz column which is having the Young modulus and mass per unit length as stochastic processes and also the distributed tangential follower load behaving stochastically is considered. The non self-adjoint differential equation and boundary conditions are considered to have random field coefficients. The standard perturbation method is employed. The non self-adjoint operators are used within the regularity domain. Full covariance structure of the free vibration eigenvalues and critical loads is derived in terms of second order properties of input random fields characterizing the system parameter fluctuations. The mean value of critical load is calculated using the averaged problem and the corresponding eigenvalue statistics are sought. Through the frequency equation a transformation is done to yield load parameter statistics. A numerical study incorporating commonly observed correlation models is reported which illustrates the full potentials of the derived expressions.

Exact free-surface flows for shallow-water equations .2. the compressible case

Exact free surface flows with shear in a compressible barotropic medium are found, extending the authors' earlier work for the incompressible medium. The barotropic medium is of finite extent in the vertical direction, while it is infinite in the horizontal direction. The ''shallow water'' equations for a compressible barotropic medium, subject to boundary conditions at the free surface and at the bottom, are solved in terms of double psi-series, Simple wave and time-dependent solutions are found; for the former the free surface is of arbitrary shape while for the latter it is a damping traveling wave in the horizontal direction, For other types of solutions, the height of the free surface is constant either on lines of constant acceleration or on lines of constant speed. In the case of an isothermal medium, when gamma = 1, we again find simple wave and time-dependent solutions.

Theoretical Analysis of the Electromotive Force of a Cell Incorporating a Composition Gradient Solid Electrolyte

New composition gradient solid electrolytes have been designed for application in high temperature solid-state galvanic sensors and in thermodynamic measurements. The functionally gradient electrolyte consists of a solid solution between two or more ionic conductors with a common ion and gradual variation in composition of the other ionic species. Unequal rates of migration of the ions, caused by the presence of the concentration gradient, may result in the development of space charge, manifesting as diffusion potential. Presented is a theoretical analysis of the EMF of cells incorporating gradient solid electrolytes. An analytical expression is derived for diffusion potential, using the thermodynamics of irreversible processes, for different types of concentration gradients and boundary conditions at the electrode/electrolyte interfaces. The diffusion potential of an isothermal cell incorporating these gradient electrolytes becomes negligible if there is only one mobile ion and the transport numbers of the relatively immobile polyionic species and electrons approach zero. The analysis of the EMF of a nonisothermal cell incorporating a composition gradient solid electrolyte indicates that the cell EMF can be expressed in terms of the thermodynamic parameters at the electrodes and the Seebeck coefficient of the gradient electrolyte under standard conditions when the transport number of one of the ions approaches unity.

Lamination-dependent shear deformation models for bending of angle-ply laminated plates

Lamination-dependent shear corrective terms in the analysis of bending of laminated plates are derived from a priori assumed linear thicknesswise distributions for gradients of transverse shear stresses by using CLPT inplane stresses in the two in-plane equilibrium equations of elasticity in each ply. In the development of a general model for angle-ply laminated plates, special cases like cylindrical bending of laminates in either direction, symmetric laminates, cross-ply laminates, antisymmetric angle-ply laminates, homogeneous plates are taken into consideration. Adding these corrective terms to the assumed displacements in (i) Classical Laminate Plate Theory (CLPT) and (ii) Classical Laminate Shear Deformation Theory (CLSDT), two new refined lamination-dependent shear deformation models are developed. Closed form solutions from these models are obtained for antisymmetric angle-ply laminates under sinusoidal load for a type of simply supported boundary conditions. Results obtained from the present models and also from Ren's model (1987) are compared with each other.

Modelling plane mixing layers using vortex points and sheets

We present here a critical assessment of two vortex approaches (both two-dimensional) to the modelling of turbulent mixing layers. In the first approach the flow is represented by point vortices, and in the second it is simulated as the evolution of a continuous vortex sheet composed of short linear elements or ''panels''. The comparison is based on fresh simulations using approximately the same number of elements in either model, paying due attention in both to the boundary conditions far downstream as well as those on the splitter plate from which the mixing layer issues. The comparisons show that, while both models satisfy the well-known invariants of vortex dynamics approximately to the same accuracy, the vortex panel model, although ultimately not convergent, leads to smoother roll-up and values of stresses and moments that are in closer agreement with the experiment, and has a higher computational efficiency for a given degree of convergence on moments. The point vortex model, while faster for a given number of elements, produces an unsatisfactory roll-up which (for the number of elements used) is rendered worse by the incorporation of the Van der Vooren correction for sheet curvature.

Representation of thermodynamic properties of quaternary systems using interaction parameters

Integral excess free energy of a quaternary system has been expressed in terms of the MacLaurin infinite series. The series is subjected to appropriate boundary conditions and each of the derivatives correlated to the corresponding interaction coefficients. The derivation of the partial functions involves extensive summation of various infinite series pertaining to the first order and quaternary parameters to remove any truncational error. The thermodynamic consistency of the derived partials has been established based on the Gibbs-Duhem relations. The equations are used to interpret the thermodynamic properties of the Fe-Cr-Ni-N system.