Jarrow-Yildirim model for inflation: theory and applications

This thesis deals with inflation theory, focussing on the model of Jarrow & Yildirim, which is nowadays used when pricing inflation derivatives. After recalling main results about short and forward interest rate models, the dynamics of the main components of the market are derived. Then the most important inflation-indexed derivatives are explained (zero coupon swap, year-on-year, cap and floor), and their pricing proceeding is shown step by step. Calibration is explained and performed with a common method and an heuristic and non standard one. The model is enriched with credit risk, too, which allows to take into account the possibility of bankrupt of the counterparty of a contract. In this context, the general method of pricing is derived, with the introduction of defaultable zero-coupon bonds, and the Monte Carlo method is treated in detailed and used to price a concrete example of contract. Appendixes: A: martingale measures, Girsanov's theorem and the change of numeraire. B: some aspects of the theory of Stochastic Differential Equations; in particular, the solution for linear EDSs, and the Feynman-Kac Theorem, which shows the connection between EDSs and Partial Differential Equations. C: some useful results about normal distribution.

Mimicking the one-dimensional marginal distributions of stochastic diffusions

In the large maturity limit, we compute explicitly the Local Volatility surface for Heston, through Dupire’s formula, with Fourier pricing of the respective derivatives of the call price. Than we verify that the prices of European call options produced by the Heston model, concide with those given by the local volatility model where the Local Volatility is computed as said above.

Pricing in stochastic-local volatility models with default

In recent years is becoming increasingly important to handle credit risk. Credit risk is the risk associated with the possibility of bankruptcy. More precisely, if a derivative provides for a payment at cert time T but before that time the counterparty defaults, at maturity the payment cannot be effectively performed, so the owner of the contract loses it entirely or a part of it. It means that the payoff of the derivative, and consequently its price, depends on the underlying of the basic derivative and on the risk of bankruptcy of the counterparty. To value and to hedge credit risk in a consistent way, one needs to develop a quantitative model. We have studied analytical approximation formulas and numerical methods such as Monte Carlo method in order to calculate the price of a bond. We have illustrated how to obtain fast and accurate pricing approximations by expanding the drift and diffusion as a Taylor series and we have compared the second and third order approximation of the Bond and Call price with an accurate Monte Carlo simulation. We have analysed JDCEV model with constant or stochastic interest rate. We have provided numerical examples that illustrate the effectiveness and versatility of our methods. We have used Wolfram Mathematica and Matlab.

A probabilistic approach to classify the levee reliability

This work aims to evaluate the reliability of these levee systems, calculating the probability of “failure” of determined levee stretches under different loads, using probabilistic methods that take into account the fragility curves obtained through the Monte Carlo Method. For this study overtopping and piping are considered as failure mechanisms (since these are the most frequent) and the major levee system of the Po River with a primary focus on the section between Piacenza and Cremona, in the lower-middle area of the Padana Plain, is analysed. The novelty of this approach is to check the reliability of individual embankment stretches, not just a single section, while taking into account the variability of the levee system geometry from one stretch to another. This work takes also into consideration, for each levee stretch analysed, a probability distribution of the load variables involved in the definition of the fragility curves, where it is influenced by the differences in the topography and morphology of the riverbed along the sectional depth analysed as it pertains to the levee system in its entirety. A type of classification is proposed, for both failure mechanisms, to give an indication of the reliability of the levee system based of the information obtained by the fragility curve analysis. To accomplish this work, an hydraulic model has been developed where a 500-year flood is modelled to determinate the residual hazard value of failure for each stretch of levee near the corresponding water depth, then comparing the results with the obtained classifications. This work has the additional the aim of acting as an interface between the world of Applied Geology and Environmental Hydraulic Engineering where a strong collaboration is needed between the two professions to resolve and improve the estimation of hydraulic risk.

Study of the sensitivity of the XENON1T experiment with the profile likelihood method

Oggi sappiamo che la materia ordinaria rappresenta solo una piccola parte dell'intero contenuto in massa dell'Universo. L'ipotesi dell'esistenza della Materia Oscura, un nuovo tipo di materia che interagisce solo gravitazionalmente e, forse, tramite la forza debole, è stata avvalorata da numerose evidenze su scala sia galattica che cosmologica. Gli sforzi rivolti alla ricerca delle cosiddette WIMPs (Weakly Interacting Massive Particles), il generico nome dato alle particelle di Materia Oscura, si sono moltiplicati nel corso degli ultimi anni. L'esperimento XENON1T, attualmente in costruzione presso i Laboratori Nazionali del Gran Sasso (LNGS) e che sarà in presa dati entro la fine del 2015, segnerà un significativo passo in avanti nella ricerca diretta di Materia Oscura, che si basa sulla rivelazione di collisioni elastiche su nuclei bersaglio. XENON1T rappresenta la fase attuale del progetto XENON, che ha già realizzato gli esperimenti XENON10 (2005) e XENON100 (2008 e tuttora in funzione) e che prevede anche un ulteriore sviluppo, chiamato XENONnT. Il rivelatore XENON1T sfrutta circa 3 tonnellate di xeno liquido (LXe) e si basa su una Time Projection Chamber (TPC) a doppia fase. Dettagliate simulazioni Monte Carlo della geometria del rivelatore, assieme a specifiche misure della radioattività dei materiali e stime della purezza dello xeno utilizzato, hanno permesso di predire con accuratezza il fondo atteso. In questo lavoro di tesi, presentiamo lo studio della sensibilità attesa per XENON1T effettuato tramite il metodo statistico chiamato Profile Likelihood (PL) Ratio, il quale nell'ambito di un approccio frequentista permette un'appropriata trattazione delle incertezze sistematiche. In un primo momento è stata stimata la sensibilità usando il metodo semplificato Likelihood Ratio che non tiene conto di alcuna sistematica. In questo modo si è potuto valutare l'impatto della principale incertezza sistematica per XENON1T, ovvero quella sulla emissione di luce di scintillazione dello xeno per rinculi nucleari di bassa energia. I risultati conclusivi ottenuti con il metodo PL indicano che XENON1T sarà in grado di migliorare significativamente gli attuali limiti di esclusione di WIMPs; la massima sensibilità raggiunge una sezione d'urto σ=1.2∙10-47 cm2 per una massa di WIMP di 50 GeV/c2 e per una esposizione nominale di 2 tonnellate∙anno. I risultati ottenuti sono in linea con l'ambizioso obiettivo di XENON1T di abbassare gli attuali limiti sulla sezione d'urto, σ, delle WIMPs di due ordini di grandezza. Con tali prestazioni, e considerando 1 tonnellata di LXe come massa fiduciale, XENON1T sarà in grado di superare gli attuali limiti (esperimento LUX, 2013) dopo soli 5 giorni di acquisizione dati.

Anisotropic seismic tomography with the reversible jump Markov chain Monte Carlo

The established isotropic tomographic models show the features of subduction zones in terms of seismic velocity anomalies, but they are generally subjected to the generation of artifacts due to the lack of anisotropy in forward modelling. There is evidence for the significant influence of seismic anisotropy in the mid-upper mantle, especially for boundary layers like subducting slabs. As consequence, in isotropic models artifacts may be misinterpreted as compositional or thermal heterogeneities. In this thesis project the application of a trans-dimensional Metropolis-Hastings method is investigated in the context of anisotropic seismic tomography. This choice arises as a response to the important limitations introduced by traditional inversion methods which use iterative procedures of optimization of a function object of the inversion. On the basis of a first implementation of the Bayesian sampling algorithm, the code is tested with some cartesian two-dimensional models, and then extended to polar coordinates and dimensions typical of subduction zones, the main focus proposed for this method. Synthetic experiments with increasing complexity are realized to test the performance of the method and the precautions for multiple contexts, taking into account also the possibility to apply seismic ray-tracing iteratively. The code developed is tested mainly for 2D inversions, future extensions will allow the anisotropic inversion of seismological data to provide more realistic imaging of real subduction zones, less subjected to generation of artifacts.

Quantum Monte Carlo study of effective masses in a polarized unitary Fermi gas

Ultracold gases provide an ideal platform for quantum simulations of many-body systems. Here we are interested in a particular system which has been the focus of most experimental and theoretical works on ultracold fermionic gases: the unitary Fermi gas. In this work we study with Quantum Monte Carlo simulations a two-component gas of fermionic atoms at zero temperature in the unitary regime. Specifically, we are interested in studying how the effective masses for the quasi-particles of the two components of the Fermi liquid evolve as the polarization is progressively reduced from full to lower values. A recent theoretical work, based on alternative diagrammatic methods, has indeed suggested that such effective masses should diverge at a critical polarization. To independently verify such predictions, we perform Variational Monte Carlo (VMC) calculations of the energy based on Jastrow-Slater wavefunctions after adding or subtracting a particle with a given momentum to a full Fermi sphere. In this way, we determine the quasi-particle dispersions, from which we extract the effective masses for different polarizations. The resulting effective masses turn out to be quite close to the non-interacting values, even though some evidence of an increase for the effective mass of the minority component appears close to the predicted value for the critical polarization. Preliminary results obtained for the majority component with the Fixed-node Diffusion Monte Carlo (DMC) method seem to indicate that DMC could lead to an increase of the effective masses in comparison with the VMC results. Finally, we point out further improvements of the trial wave-function and boundary conditions that would be necessary in future simulations to draw definite conclusions on the effective masses of the polarized unitary Fermi gas.