Closed form approximations for spread options

This article expresses the price of a spread option as the sum of the prices of two compound options. One compound option is to exchange vanilla call options on the two underlying assets and the other is to exchange the corresponding put options. This way we derive a new closed form approximation for the price of a European spread option and a corresponding approximation for each of its price, volatility and correlation hedge ratios. Our approach has many advantages over existing analytical approximations, which have limited validity and an indeterminacy that renders them of little practical use. The compound exchange option approximation for European spread options is then extended to American spread options on assets that pay dividends or incur costs. Simulations quantify the accuracy of our approach; we also present an empirical application to the American crack spread options that are traded on NYMEX. For illustration, we compare our results with those obtained using the approximation attributed to Kirk (1996, Correlation in energy markets. In: V. Kaminski (Ed.), Managing Energy Price Risk, pp. 71–78 (London: Risk Publications)), which is commonly used by traders.

Latitude and longitude vertical disparities

The literature on vertical disparity is complicated by the fact that several different definitions of the term “vertical disparity” are in common use, often without a clear statement about which is intended or a widespread appreciation of the properties of the different definitions. Here, we examine two definitions of retinal vertical disparity: elevation-latitude and elevation-longitude disparities. Near the fixation point, these definitions become equivalent, but in general, they have quite different dependences on object distance and binocular eye posture, which have not previously been spelt out. We present analytical approximations for each type of vertical disparity, valid for more general conditions than previous derivations in the literature: we do not restrict ourselves to objects near the fixation point or near the plane of regard, and we allow for non-zero torsion, cyclovergence, and vertical misalignments of the eyes. We use these expressions to derive estimates of the latitude and longitude vertical disparities expected at each point in the visual field, averaged over all natural viewing. Finally, we present analytical expressions showing how binocular eye position—gaze direction, convergence, torsion, cyclovergence, and vertical misalignment—can be derived from the vertical disparity field and its derivatives at the fovea.

Body-centric modelling, identification, and acceleration tracking control of a quadrotor UAV

This paper presents the mathematical development of a body-centric nonlinear dynamic model of a quadrotor UAV that is suitable for the development of biologically inspired navigation strategies. Analytical approximations are used to find an initial guess of the parameters of the nonlinear model, then parameter estimation methods are used to refine the model parameters using the data obtained from onboard sensors during flight. Due to the unstable nature of the quadrotor model, the identification process is performed with the system in closed-loop control of attitude angles. The obtained model parameters are validated using real unseen experimental data. Based on the identified model, a Linear-Quadratic (LQ) optimal tracker is designed to stabilize the quadrotor and facilitate its translational control by tracking body accelerations. The LQ tracker is tested on an experimental quadrotor UAV and the obtained results are a further means to validate the quality of the estimated model. The unique formulation of the control problem in the body frame makes the controller better suited for bio-inspired navigation and guidance strategies than conventional attitude or position based control systems that can be found in the existing literature.

Model-based vehicle detection and classification using orthographic approximations

This paper reports the current state of work to simplify our previous model-based methods for visual tracking of vehicles for use in a real-time system intended to provide continuous monitoring and classification of traffic from a fixed camera on a busy multi-lane motorway. The main constraints of the system design were: (i) all low level processing to be carried out by low-cost auxiliary hardware, (ii) all 3-D reasoning to be carried out automatically off-line, at set-up time. The system developed uses three main stages: (i) pose and model hypothesis using 1-D templates, (ii) hypothesis tracking, and (iii) hypothesis verification, using 2-D templates. Stages (i) & (iii) have radically different computing performance and computational costs, and need to be carefully balanced for efficiency. Together, they provide an effective way to locate, track and classify vehicles.

Multi-mode approximations to wave scattering by an uneven bed

Approximations to the scattering of linear surface gravity waves on water of varying quiescent depth are Investigated by means of a variational approach. Previous authors have used wave modes associated with the constant depth case to approximate the velocity potential, leading to a system of coupled differential equations. Here it is shown that a transformation of the dependent variables results in a much simplified differential equation system which in turn leads to a new multi-mode 'mild-slope' approximation. Further, the effect of adding a bed mode is examined and clarified. A systematic analytic method is presented for evaluating inner products that arise and numerical experiments for two-dimensional scattering are used to examine the performance of the new approximations.

Approximations to the scattering of water waves by steep topography

A new method is developed for approximating the scattering of linear surface gravity waves on water of varying quiescent depth in two dimensions. A conformal mapping of the fluid domain onto a uniform rectangular strip transforms steep and discontinuous bed profiles into relatively slowly varying, smooth functions in the transformed free-surface condition. By analogy with the mild-slope approach used extensively in unmapped domains, an approximate solution of the transformed problem is sought in the form of a modulated propagating wave which is determined by solving a second-order ordinary differential equation. This can be achieved numerically, but an analytic solution in the form of a rapidly convergent infinite series is also derived and provides simple explicit formulae for the scattered wave amplitudes. Small-amplitude and slow variations in the bedform that are excluded from the mapping procedure are incorporated in the approximation by a straightforward extension of the theory. The error incurred in using the method is established by means of a rigorous numerical investigation and it is found that remarkably accurate estimates of the scattered wave amplitudes are given for a wide range of bedforms and frequencies.

Analytical potentials for triatomic molecules IX. The prediction of anharmonic force constants from potential energy surfaces based on harmonic force fields and dissociation energies for SO2 and O3

Analytical potential energy functions which are valid at all dissociation limits have been derived for the ground states of SO2 and O3. The procedure involves minimizing the errors between the observed vibrational spectra and spectra calculated by a variational procedure. Good agreement is obtained between the observed and calculated spectra for both molecules. Comparisons are made between anharmonic force fields, previously determined from the spectral data, and the force fields obtained by differentiating the derived analytical functions at the equilibrium configurations.

Analytical potentials for triatomic molecules from spectroscopic data V. Application to HOX (X=F, Cl, Br, I)

Analytical potential energy functions are reported for HOX (X=F, Cl, Br, I). The surface for HOF predicts two metastable minima as well as the equilibrium configuration. These correspond to HFO (bent) and OHF (linear). Ab initio calculations performed for the HOF surface confirm these predictions. Comparisons are drawn between the two sets of results, and a vibrational analysis is undertaken for the hydrogen bonded OHF species. For HOCl, one further minimum is predicted, corresponding to HClO (bent), the parameters for which compare favourably with those reported from ab initio studies. In contrast, only the equilibrium configurations are predicted to be stable for HOBr and HOI.

Analytical functions for the ground state potential surfaces of C3 (X 1 Σ g+) and HCN (X 1 Σ +)

Analytic functions have been obtained to represent the potential energy surfaces of C3 and HCN in their ground electronic states. These functions closely reproduce the available data on the energy, geometry, and force constants in all stable conformations, as well as data on the various dissociation products, and ab initio calculations of the energy at other conformations. The form of the resulting surfaces are portrayed in various ways and discussed briefly.

Analytical potentials for triatomic molecules from spectroscopic data VI. On choosing internal coordinates to describe triatomic potential energy surfaces with more than one minimum

Orthogonal internal coordinates are defined which have useful properties for constructing the potential energy functions of triatomic molecules with two or three minima on the surface. The coordinates are used to obtain ground state potentials of ClOO and HOF, both of which have three minima.

Analytical potentials for triatomic molecules VIII. A two valued surface for the lowest 1A¢ surfaces of H2O

Ab initio calculations of the energy have been made at approximately 150 points on the two lowest singlet A' potential energy surfaces of the water molecule, 1A' and 1A', covering structures having D∞h, C∞v, C2v and Cs symmetries. The object was to obtain an ab initio surface of uniform accuracy over the whole three-dimensional coordinate space. Molecular orbitals were constructed from a double zeta plus Rydberg basis, and correlation was introduced by single and double excitations from multiconfiguration states which gave the correct dissociation behaviour. A two-valued analytical potential function has been constructed to fit these ab initio energy calculations. The adiabatic energies are given in our analytical function as the eigenvalues of a 2 2 matrix, whose diagonal elements define two diabatic surfaces. The off-diagonal element goes to zero for those configurations corresponding to surface intersections, so that our adiabatic surface exhibits the correct Σ/II conical intersections for linear configurations, and singlet/triplet intersections of the O + H2 dissociation fragments. The agreement between our analytical surface and experiment has been improved by using empirical diatomic potential curves in place of those derived from ab initio calculations.