Risk Minimizing Option Pricing in a Semi-Markov Modulated Market

We address risk minimizing option pricing in a semi-Markov modulated market where the floating interest rate depends on a finite state semi-Markov process. The growth rate and the volatility of the stock also depend on the semi-Markov process. Using the Föllmer–Schweizer decomposition we find the locally risk minimizing price for European options and the corresponding hedging strategy. We develop suitable numerical methods for computing option prices.

Generation of rotationally dominated galaxies by mergers of pressure-supported progenitors

Through the analysis of a set of numerical simulations of major mergers between initially non-rotating, pressure-supported progenitor galaxies with a range of central mass concentrations, we have shown that: (1) it is possible to generate elliptical-like galaxies, with outside one effective radius, as a result of the conversion of orbital- into internal-angular momentum; (2) the outer regions acquire part of the angular momentum first; (3) both the baryonic and the dark matter components of the remnant galaxy acquire part of the angular momentum, the relative fractions depending on the initial concentration of the merging galaxies. For this conversion to occur the initial baryonic component must be sufficiently dense and/or the encounter should take place on an orbit with high angular momentum. Systems with these hybrid properties have recently been observed through a combination of stellar absorption lines and planetary nebulae for kinematic studies of early-type galaxies. Our results are in qualitative agreement with these observations and demonstrate that even mergers composed of non rotating, pressure-supported progenitor galaxies can produce early-type galaxies with significant rotation at large radii.

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.

Practising Western Science Outside the West: Personal Observations on the Indian Scene

Modern science, which was an indigenous product of Western culture, is now being practised in many non-Western countries. This paper discusses the peculiar social, cultural and intellectual problems which scientists of these non-Western countries face in adopting Western science in their situations, with special reference to India. It is pointed out that, in addition to money and communication, it is necessary to have a proper psychological gestalt to practise science satisfactorily. The author analyzes his experience as a physics student in India and in the United States to clarify the nature of this psychological gestalt, and to explain what makes it difficult for non-Western scientists to acquire it.

Performance evaluation of an integrated solar water heater as an option for building energy conservation

Since a majority of residential and industrial building hot water needs are around 50 degrees C, an integrated solar water heater could provide a bulk source that blends collection and storage into one unit. This paper describes the design, construction and performance test results of one such water-heating device. The test unit has an absorber area of 1.3 m(2) and can hold 1701 of water, of which extractable volume per day is 1001. Its performance was evaluated under various typical operating conditions. Every morning at about 7:00 a.m., 1001 of hot water were drawn from the sump and replaced with cold water from the mains. Although, during most of the days, the peak temperatures of water obtained are between 50 and 60 degrees C, the next morning temperatures were lower at 45-50 degrees C. Daytime collection efficiencies of about 60% and overall efficiencies of about 40% were obtained. Tests were conducted with and without stratification. Night radiation losses were reduced by use of a screen insulation.

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.