Stochastic physics and representation of El Niño Southern Oscillation in climate models

El Niño-Southern Oscillation (ENSO) è il maggiore fenomeno climatico che avviene a livello dell’Oceano Pacifico tropicale e che ha influenze ambientali, climatiche e socioeconomiche a larga scala. In questa tesi si ripercorrono i passi principali che sono stati fatti per tentare di comprendere un fenomeno così complesso. Per prima cosa, si sono studiati i meccanismi che ne governano la dinamica, fino alla formulazione del modello matematico chiamato Delayed Oscillator (DO) model, proposto da Suarez e Schopf nel 1988. In seguito, per tenere conto della natura caotica del sistema studiato, si è introdotto nel modello lo schema chiamato Stochastically Perturbed Parameterisation Tendencies (SPPT). Infine, si sono portati due esempi di soluzione numerica del DO, sia con che senza l’introduzione della correzione apportata dallo schema SPPT, e si è visto in che misura SPPT porta reali miglioramenti al modello studiato.

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.