Black-scholes type equations

In this work we are concerned with the analysis and numerical solution of Black-Scholes type equations arising in the modeling of incomplete financial markets and an inverse problem of determining the local volatility function in a generalized Black-Scholes model from observed option prices. In the first chapter a fully nonlinear Black-Scholes equation which models transaction costs arising in option pricing is discretized by a new high order compact scheme. The compact scheme is proved to be unconditionally stable and non-oscillatory and is very efficient compared to classical schemes. Moreover, it is shown that the finite difference solution converges locally uniformly to the unique viscosity solution of the continuous equation. In the next chapter we turn to the calibration problem of computing local volatility functions from market data in a generalized Black-Scholes setting. We follow an optimal control approach in a Lagrangian framework. We show the existence of a global solution and study first- and second-order optimality conditions. Furthermore, we propose an algorithm that is based on a globalized sequential quadratic programming method and a primal-dual active set strategy, and present numerical results. In the last chapter we consider a quasilinear parabolic equation with quadratic gradient terms, which arises in the modeling of an optimal portfolio in incomplete markets. The existence of weak solutions is shown by considering a sequence of approximate solutions. The main difficulty of the proof is to infer the strong convergence of the sequence. Furthermore, we prove the uniqueness of weak solutions under a smallness condition on the derivatives of the covariance matrices with respect to the solution, but without additional regularity assumptions on the solution. The results are illustrated by a numerical example.

Numerical coupling of thermal-electric network models and energy-transport equations including optoelectronic semiconductor devices

In this work the numerical coupling of thermal and electric network models with model equations for optoelectronic semiconductor devices is presented. Modified nodal analysis (MNA) is applied to model electric networks. Thermal effects are modeled by an accompanying thermal network. Semiconductor devices are modeled by the energy-transport model, that allows for thermal effects. The energy-transport model is expandend to a model for optoelectronic semiconductor devices. The temperature of the crystal lattice of the semiconductor devices is modeled by the heat flow eqaution. The corresponding heat source term is derived under thermodynamical and phenomenological considerations of energy fluxes. The energy-transport model is coupled directly into the network equations and the heat flow equation for the lattice temperature is coupled directly into the accompanying thermal network. The coupled thermal-electric network-device model results in a system of partial differential-algebraic equations (PDAE). Numerical examples are presented for the coupling of network- and one-dimensional semiconductor equations. Hybridized mixed finite elements are applied for the space discretization of the semiconductor equations. Backward difference formluas are applied for time discretization. Thus, positivity of charge carrier densities and continuity of the current density is guaranteed even for the coupled model.