The parallel solution of early-exercise Asian options with stochastic volatility

This paper describes an parallel semi-Lagrangian finite difference approach to the pricing of early exercise Asian Options on assets with a stochastic volatility. A multigrid procedure is described for the fast iterative solution of the discrete linear complementarity problems that result. The accuracy and performance of this approach is improved considerably by a strike-price related analytic transformation of asset prices. Asian options are contingent claims with payoffs that depend on the average price of an asset over some time interval. The payoff may depend on this average and a fixed strike price (Fixed Strike Asians) or it may depend on the average and the asset price (Floating Strike Asians). The option may also permit early exercise (American contract) or confine the holder to a fixed exercise date (European contract). The Fixed Strike Asian with early exercise is considered here where continuous arithmetic averaging has been used. Pricing such an option where the asset price has a stochastic volatility leads to the requirement to solve a tri-variate partial differential inequation in the three state variables of asset price, average price and volatility (or equivalently, variance). The similarity transformations [6] used with Floating Strike Asian options to reduce the dimensionality of the problem are not applicable to Fixed Strikes and so the numerical solution of a tri-variate problem is necessary. The computational challenge is to provide accurate solutions sufficiently quickly to support realtime trading activities at a reasonable cost in terms of hardware requirements.

'Re-using an existing wheel' developing data architecture for cooperating autonomous and semi-autonomous, agent-based web services

This short position paper considers issues in developing Data Architecture for the Internet of Things (IoT) through the medium of an exemplar project, Domain Expertise Capture in Authoring and Development ­Environments (DECADE). A brief discussion sets the background for IoT, and the development of the ­distinction between things and computers. The paper makes a strong argument to avoid reinvention of the wheel, and to reuse approaches to distributed heterogeneous data architectures and the lessons learned from that work, and apply them to this situation. DECADE requires an autonomous recording system, ­local data storage, semi-autonomous verification model, sign-off mechanism, qualitative and ­quantitative ­analysis ­carried out when and where required through web-service architecture, based on ontology and analytic agents, with a self-maintaining ontology model. To develop this, we describe a web-service ­architecture, ­combining a distributed data warehouse, web services for analysis agents, ontology agents and a ­verification engine, with a centrally verified outcome database maintained by certifying body for qualification/­professional status.

The development of dynamic CFD model of the magnetic semi-levitation of liquid metals

In the casting of reactive metals, such as titanium alloys, contamination can be prevented if there is no contact between the hot liquid metal and solid crucible. This can be achieved by containing the liquid metal by means of high frequency AC magnetic field. A water cooled current-carrying coil, surrounding the metal can then provide the required Lorentz forces, and at the same time the current induced in the metal can provide the heating required to melt it. This ‘attractive’ processing solution has however many problems, the most serious being that of the control and containment of the liquid metal envelope, which requires a balance of the gravity and induced inertia forces on the one side, and the containing Lorentz and surface tension forces on the other. To model this process requires a fully coupled dyna ic solution of the flow fields, magnetic field and heat transfer/melding process to account for. A simplified solution has been published previously providing quasi-static solutions only, by taking the irrotational ‘magnetic pressure’ term of the Lorentz force into account. The authors remedy this deficiency by modelling the full problem using CFD techniques. The salient features of these techniques are included in this paper, as space allows.