A study of the Hobson and Rogers volatility model

We firstly examine the model of Hobson and Rogers for the volatility of a financial asset such as a stock or share. The main feature of this model is the specification of volatility in terms of past price returns. The volatility process and the underlying price process share the same source of randomness and so the model is said to be complete. Complete models are advantageous as they allow a unique, preference independent price for options on the underlying price process. One of the main objectives of the model is to reproduce the `smiles' and `skews' seen in the market implied volatilities and this model produces the desired effect. In the first main piece of work we numerically calibrate the model of Hobson and Rogers for comparison with existing literature. We also develop parameter estimation methods based on the calibration of a GARCH model. We examine alternative specifications of the volatility and show an improvement of model fit to market data based on these specifications. We also show how to process market data in order to take account of inter-day movements in the volatility surface. In the second piece of work, we extend the Hobson and Rogers model in a way that better reflects market structure. We extend the model to take into account both first and second order effects. We derive and numerically solve the pde which describes the price of options under this extended model. We show that this extension allows for a better fit to the market data. Finally, we analyse the parameters of this extended model in order to understand intuitively the role of these parameters in the volatility surface.

Extended nonlinear analytical models of compliant parallelogram mechanisms: third-order models

This paper proposes extended nonlinear analytical models, third-order models, of compliant parallelogram mechanisms. These models are capable of capturing the accurate effects from the very large axial force within the transverse motion range of 10% of the beam length through incorporating the terms associated with the high-order (up to third-order) axial force. Firstly, the free-body diagram method is employed to derive the nonlinear analytical model for a basic compliant parallelogram mechanism based on load-displacement relations of a single beam, geometry compatibility conditions, and load-equilibrium conditions. The procedures for the forward solutions and inverse solutions are described. Nonlinear analytical models for guided compliant multi-beam parallelogram mechanisms are then obtained. A case study of the compound compliant parallelogram mechanism, composed of two basic compliant parallelogram mechanisms in symmetry, is further implemented. This work intends to estimate the internal axial force change, the transverse force change, and the transverse stiffness change with the transverse motion using the proposed third-order model in comparison with the first-order model proposed in the prior art. In addition, FEA (finite element analysis) results validate the accuracy of the third-order model for a typical example. It is shown that in the case study the slenderness ratio affects the result discrepancy between the third-order model and the first-order model significantly, and the third-order model can illustrate a non-monotonic transverse stiffness curve if the beam is thin enough.