Time domain decomposition for European options in financial modelling

Finance is one of the fastest growing areas in modern applied mathematics with real world applications. The interest of this branch of applied mathematics is best described by an example involving shares. Shareholders of a company receive dividends which come from the profit made by the company. The proceeds of the company, once it is taken over or wound up, will also be distributed to shareholders. Therefore shares have a value that reflects the views of investors about the likely dividend payments and capital growth of the company. Obviously such value will be quantified by the share price on stock exchanges. Therefore financial modelling serves to understand the correlations between asset and movements of buy/sell in order to reduce risk. Such activities depend on financial analysis tools being available to the trader with which he can make rapid and systematic evaluation of buy/sell contracts. There are other financial activities and it is not an intention of this paper to discuss all of these activities. The main concern of this paper is to propose a parallel algorithm for the numerical solution of an European option. This paper is organised as follows. First, a brief introduction is given of a simple mathematical model for European options and possible numerical schemes of solving such mathematical model. Second, Laplace transform is applied to the mathematical model which leads to a set of parametric equations where solutions of different parametric equations may be found concurrently. Numerical inverse Laplace transform is done by means of an inversion algorithm developed by Stehfast. The scalability of the algorithm in a distributed environment is demonstrated. Third, a performance analysis of the present algorithm is compared with a spatial domain decomposition developed particularly for time-dependent heat equation. Finally, a number of issues are discussed and future work suggested.

Multiphase modeling of melting / solidification with high density variations using XFEM

La modélisation de la cryolite, utilisée dans la fabrication de l’aluminium, implique plusieurs défis, notament la présence de discontinuités dans la solution et l’inclusion de la difference de densité entre les phases solide et liquide. Pour surmonter ces défis, plusieurs éléments novateurs ont été développés dans cette thèse. En premier lieu, le problème du changement de phase, communément appelé problème de Stefan, a été résolu en deux dimensions en utilisant la méthode des éléments finis étendue. Une formulation utilisant un multiplicateur de Lagrange stable spécialement développée et une interpolation enrichie a été utilisée pour imposer la température de fusion à l’interface. La vitesse de l’interface est déterminée par le saut dans le flux de chaleur à travers l’interface et a été calculée en utilisant la solution du multiplicateur de Lagrange. En second lieu, les effets convectifs ont été inclus par la résolution des équations de Stokes dans la phase liquide en utilisant la méthode des éléments finis étendue aussi. Troisièmement, le changement de densité entre les phases solide et liquide, généralement négligé dans la littérature, a été pris en compte par l’ajout d’une condition aux limites de vitesse non nulle à l’interface solide-liquide pour respecter la conservation de la masse dans le système. Des problèmes analytiques et numériques ont été résolus pour valider les divers composants du modèle et le système d’équations couplés. Les solutions aux problèmes numériques ont été comparées aux solutions obtenues avec l’algorithme de déplacement de maillage de Comsol. Ces comparaisons démontrent que le modèle par éléments finis étendue reproduit correctement le problème de changement phase avec densités variables.

Active control of sound radiated by vibrating surfaces on a McLaren supercar

Sound radiators based on forced vibrations of plates are becoming widely employed, mainly for active sound enhancement and noise cancelling systems, both in music and automotive environment. Active sound enhancement solutions based on electromagnetic shakers hence find increasing interest. Mostly diffused applications deal with active noise control (ANC) and active vibration control systems for improving the acoustic experience inside or outside the vehicle. This requires investigating vibrational and, consequently, vibro-acoustic characteristics of vehicles. Therefore, simulation and processing methods capable of reducing the calculation time and providing high-accuracy results, are strongly demanded. In this work, an ideal case study on rectangular plates in fully clamped conditions preceded a real case analysis on vehicle panels. The sound radiation generated by a vibrating flat or shallow surface can be calculated by means of Rayleigh’s integral. The analytical solution of the problem is here calculated implementing the equations in MATLAB. Then, the results are compared with a numerical model developed in COMSOL Multiphysics, employing Finite Element Method (FEM). A very good matching between analytical and numerical solutions is shown, thus the cross validation of the two methods is achieved. The shift to the real case study, on a McLaren super car, led to the development of a mixed analytical-numerical method. Optimum results were obtained with mini shakers excitement, showing good matching of the recorded SPL with the calculated one over all the selected frequency band. In addition, a set of directivity measurements of the hood were realized, to start studying the spatiality of sound, which is fundamental to active noise control systems.

A Study on Unconditionally Stable FDTD Methods for the Modeling of Metamaterials

We assess the performance of three unconditionally stable finite-difference time-domain (FDTD) methods for the modeling of doubly dispersive metamaterials: 1) locally one-dimensional FDTD; 2) locally one-dimensional FDTD with Strang splitting; and (3) alternating direction implicit FDTD. We use both double-negative media and zero-index media as benchmarks.

Alternative positional FEM applied to thermomechanical impact of truss structures

This paper presents a formulation to deal with dynamic thermomechanical problems by the finite element method. The proposed methodology is based on the minimum potential energy theorem written regarding nodal positions, not displacements, to solve the mechanical problem. The thermal problem is solved by a regular finite element method. Such formulation has the advantage of being simple and accurate. As a solution strategy, it has been used as a natural split of the thermomechanical problem, usually called isothermal split or isothermal staggered algorithm. Usual internal variables and the additive decomposition of the strain tensor have been adopted to model the plastic behavior. Four examples are presented to show the applicability of the technique. The results are compared with other authors` numerical solutions and experimental results. (C) 2010 Elsevier B.V. All rights reserved.

Gas flow analysis in a Kraft recovery boiler

Demands for optimal boiler performance and increased concerns in lowering emission have always been the driving force in the reevaluation and evolution of the Kraft boiler: specifically the air distribution strategies that are directly related to achieving increased residence time of flue gas combustion inside the furnace which in turn lowers atmosphere emission levels and enhances boiler operation. This paper presents the results of a study that analyzes the interaction of the different multilevel air injections have on flue gas flow patterns including various quaternary air supply arrangements. Additionally, this study assesses the performance of the CFD (Computational Fluid Dynamics) model against data available in literature. Simulations were performed considering isothermal and incompressible flows, and did not take into account thermal phenomena or chemical reactions. The numerical solutions generated proved to be coherently related to the data available in literature, and provided proof of the efficiency of tertiary level air injection, as well as revealed that quaternary air injection ports arranged in a symmetrical configuration is most suitable for optimal equipment operation. (C) 2010 Elsevier B.V. All rights reserved.

Computationally efficient solution techniques for adsorption problems involving steep gradients in bidisperse particles

A piecewise uniform fitted mesh method turns out to be sufficient for the solution of a surprisingly wide variety of singularly perturbed problems involving steep gradients. The technique is applied to a model of adsorption in bidisperse solids for which two fitted mesh techniques, a fitted-mesh finite difference method (FMFDM) and fitted mesh collocation method (FMCM) are presented. A combination (FMCMD) of FMCM and the DASSL integration package is found to be most effective in solving the problems. Numerical solutions (FMFDM and FMCMD) were found to match the analytical solution when the adsorption isotherm is linear, even under conditions involving steep gradients for which global collocation fails. In particular, FMCMD is highly efficient for macropore diffusion control or micropore diffusion control. These techniques are simple and there is no limit on the range of the parameters. The techniques can be applied to a variety of adsorption and desorption problems in bidisperse solids with non-linear isotherm and for arbitrary particle geometry.

Finite element analysis of steady-state natural convection problems in fluid-saturated porous media heated from below

In this paper, a progressive asymptotic approach procedure is presented for solving the steady-state Horton-Rogers-Lapwood problem in a fluid-saturated porous medium. The Horton-Rogers-Lapwood problem possesses a bifurcation and, therefore, makes the direct use of conventional finite element methods difficult. Even if the Rayleigh number is high enough to drive the occurrence of natural convection in a fluid-saturated porous medium, the conventional methods will often produce a trivial non-convective solution. This difficulty can be overcome using the progressive asymptotic approach procedure associated with the finite element method. The method considers a series of modified Horton-Rogers-Lapwood problems in which gravity is assumed to tilt a small angle away from vertical. The main idea behind the progressive asymptotic approach procedure is that through solving a sequence of such modified problems with decreasing tilt, an accurate non-zero velocity solution to the Horton-Rogers-Lapwood problem can be obtained. This solution provides a very good initial prediction for the solution to the original Horton-Rogers-Lapwood problem so that the non-zero velocity solution can be successfully obtained when the tilted angle is set to zero. Comparison of numerical solutions with analytical ones to a benchmark problem of any rectangular geometry has demonstrated the usefulness of the present progressive asymptotic approach procedure. Finally, the procedure has been used to investigate the effect of basin shapes on natural convection of pore-fluid in a porous medium. (C) 1997 by John Wiley & Sons, Ltd.

Solution of adsorption problems involving steep moving profiles

The moving finite element collocation method proposed by Kill et al. (1995) Chem. Engng Sci. 51 (4), 2793-2799 for solution of problems with steep gradients is further developed to solve transient problems arising in the field of adsorption. The technique is applied to a model of adsorption in solids with bidisperse pore structures. Numerical solutions were found to match the analytical solution when it exists (i.e. when the adsorption isotherm is linear). The method is simple yet sufficiently accurate for use in adsorption problems, where global collocation methods fail. (C) 1998 Elsevier Science Ltd. All rights reserved.

Finite element modelling of dissipative structures for nonequilibrium chemical reactions in fluid-saturated porous media

We use the finite element method to model and predict the dissipative structures of chemical species for a nonequilibrium chemical reaction system in a fluid-saturated porous medium. In particular, we explore the conditions under which dissipative structures of the species may exist in the Brusselator type of nonequilibrium chemical reaction. Since this is the first time the finite element method and related strategies have been used to study the chemical instability problems in a fluid-saturated porous medium, it is essential to validate the method and strategies before they are put into application. For this purpose, we have rigorously derived the analytical solutions for dissipative structures of chemical species in a benchmark problem, which geometrically is a square. Comparison of the numerical solutions with the analytical ones demonstrates that the proposed numerical method and strategy are robust enough to solve chemical instability problems in a fluid-saturated porous medium. Finally, the related numerical results from two application examples indicate that both the regime and the magnitude of pore-fluid flow have significant effects on the nature of the dissipative structures that developed for a nonequilibrium chemical reaction system in a fluid-saturated porous medium. The motivation for this study is that self-organization under conditions of pore-fluid flow in a porous medium is a potential mechanism of the orebody formation and mineralization in the upper crust of the Earth. (C) 2000 Elsevier Science S.A. All rights reserved.

A two-dimensional analytical solution of groundwater responses to tidal loading in an estuary and ocean

Previous studies on tidal dynamics of coastal aquifers have focussed on the inland propagation of oceanic tides in the cross-shore direction, a configuration that is essentially one-dimensional. Aquifers at natural coasts can also be influenced by tidal waves in nearby estuaries, resulting in a more complex behaviour of head fluctuations in the aquifers. We present an analytical solution to the two-dimensional depth-averaged groundwater flow equation for a semi-infinite aquifer subject to oscillating head conditions at the boundaries. The solution describes the tidal dynamics of a coastal aquifer that is adjacent to a cross-shore estuary. Both the effects of oceanic and estuarine tides on the aquifer are included in the solution. The analytical prediction of the head fluctuations is verified by comparison with numerical solutions computed using a standard finite-difference method. An essential feature of the present analytical solution is the interaction between the cross- and along-shore tidal waves in the aquifer area near the estuary's entry. As the distance from the estuary or coastline increases, the wave interaction is weakened and the aquifer response is reduced, respectively, to the one-dimensional solution for oceanic tides or the solution of Sun (Sun H. A two-dimensional analytical solution of groundwater response to tidal loading in an estuary, Water Resour Res 1997;33:1429-35) for two-dimensional non-interacting tidal waves. (C) 2000 Elsevier Science Ltd. All rights reserved.

Sudden drawdown and drainage of a horizontal aquifer

Drainage of a saturated horizontal aquifer following a sudden drawdown is reanalyzed using the Boussinesq equation. The effect of the finite length of the aquifer is considered in detail. An analytical approximation based on a superposition principle yields a very good estimate of the outflow when compared to accurate numerical solutions. An illustration of the new analytical approach to analyze basin-scale field data is used to demonstrate possible field applications of the new solution.

Grid structure impact in sparse point representation of derivatives

In the Sparse Point Representation (SPR) method the principle is to retain the function data indicated by significant interpolatory wavelet coefficients, which are defined as interpolation errors by means of an interpolating subdivision scheme. Typically, a SPR grid is coarse in smooth regions, and refined close to irregularities. Furthermore, the computation of partial derivatives of a function from the information of its SPR content is performed in two steps. The first one is a refinement procedure to extend the SPR by the inclusion of new interpolated point values in a security zone. Then, for points in the refined grid, such derivatives are approximated by uniform finite differences, using a step size proportional to each point local scale. If required neighboring stencils are not present in the grid, the corresponding missing point values are approximated from coarser scales using the interpolating subdivision scheme. Using the cubic interpolation subdivision scheme, we demonstrate that such adaptive finite differences can be formulated in terms of a collocation scheme based on the wavelet expansion associated to the SPR. For this purpose, we prove some results concerning the local behavior of such wavelet reconstruction operators, which stand for SPR grids having appropriate structures. This statement implies that the adaptive finite difference scheme and the one using the step size of the finest level produce the same result at SPR grid points. Consequently, in addition to the refinement strategy, our analysis indicates that some care must be taken concerning the grid structure, in order to keep the truncation error under a certain accuracy limit. Illustrating results are presented for 2D Maxwell's equation numerical solutions.

Mathematical modelling of shallow flows: closure models drawn from grain-scale mechanics of sediment transport and flow hydrodynamics

Canadian Journal of Civil Engineering 36(10) 1605–16

Application of standard and refined heat balance integral methods to one-dimensional Stefan problems

The work in this paper concerns the study of conventional and refined heat balance integral methods for a number of phase change problems. These include standard test problems, both with one and two phase changes, which have exact solutions to enable us to test the accuracy of the approximate solutions. We also consider situations where no analytical solution is available and compare these to numerical solutions. It is popular to use a quadratic profile as an approximation of the temperature, but we show that a cubic profile, seldom considered in the literature, is far more accurate in most circumstances. In addition, the refined integral method can give greater improvement still and we develop a variation on this method which turns out to be optimal in some cases. We assess which integral method is better for various problems, showing that it is largely dependent on the specified boundary conditions.