Affine processes, arbitrage-Free Term structures of legendre polynomials,and option pricing

Multivariate Affine term structure models have been increasingly used for pricing derivatives in fixed income markets. In these models, uncertainty of the term structure is driven by a state vector, while the short rate is an affine function of this vector. The model is characterized by a specific form for the stochastic differential equation (SDE) for the evolution of the state vector. This SDE presents restrictions on its drift term which rule out arbitrages in the market. In this paper we solve the following inverse problem: Suppose the term structure of interest rates is modeled by a linear combination of Legendre polynomials with random coefficients. Is there any SDE for these coefficients which rules out arbitrages? This problem is of particular empirical interest because the Legendre model is an example of factor model with clear interpretation for each factor, in which regards movements of the term structure. Moreover, the Affine structure of the Legendre model implies knowledge of its conditional characteristic function. From the econometric perspective, we propose arbitrage-free Legendre models to describe the evolution of the term structure. From the pricing perspective, we follow Duffie et al. (2000) in exploring Legendre conditional characteristic functions to obtain a computational tractable method to price fixed income derivatives. Closing the article, the empirical section presents precise evidence on the reward of implementing arbitrage-free parametric term structure models: The ability of obtaining a good approximation for the state vector by simply using cross sectional data.

A systematic component of the jump-risk premium in an AJD model

We develop an affine jump diffusion (AJD) model with the jump-risk premium being determined by both idiosyncratic and systematic sources of risk. While we maintain the classical affine setting of the model, we add a finite set of new state variables that affect the paths of the primitive, under both the actual and the risk-neutral measure, by being related to the primitive's jump process. Those new variables are assumed to be commom to all the primitives. We present simulations to ensure that the model generates the volatility smile and compute the "discounted conditional characteristic function'' transform that permits the pricing of a wide range of derivatives.

Modelagem estocástica de opções de câmbio no Brasil: aplicação de transformada rápida de Fourier e expansão assintótica ao modelo de Heston

Pós-graduação em Física - IFT

Determinação das velocidades intervalares usando a teoria paraxial do raio: aproximação de segunda ordem dos tempos de trânsito

Neste trabalho foi desenvolvido um método de solução ao problema inverso para modelos sísmicos compostos por camadas homogêneas e isotrópicas separadas por superfícies suaves, que determina as velocidades intervalares em profundidade e calcula a geometria das interfaces. O tempo de trânsito é expresso como uma função de parâmetros referidos a um sistema de coordenadas fixo no raio central, que é determinada numericamente na superfície superior do modelo. Essa função é posteriormente calculada na interface anterior que limita a camada não conhecida, através de um processo que determina a função característica em profundidade. A partir da função avaliada na interface anterior se calculam sua velocidade intervalar e a geometria da superfície posterior onde tem lugar a reflexão do raio. O procedimento se repete de uma forma recursiva nas camadas mais profundas obtendo assim a solução completa do modelo, não precisando em nenhum passo informação diferente à das camadas superiores. O método foi expresso num algoritmo e se desenvolveram programas de computador, os quais foram testados com dados sintéticos de modelos que representam feições estruturais comuns nas seções geológicas, fornecendo as velocidades em profundidade e permitindo a reconstrução das interfaces. Uma análise de sensibilidade sobre os programas mostrou que a determinação da função característica e a estimação das velocidades intervalares e geometria das interfaces são feitos por métodos considerados estáveis. O intervalo empírico de aplicabilidade das correções dinâmicas hiperbólicas foi tomado como uma estimativa da ordem de magnitude do intervalo válido para a aplicação do método.

Análise de parâmetros da função característica de Hamilton

A análise de velocidades é um processo fundamental na sísmica de reflexão, onde as velocidades de empilhamento bem como o tempo de trânsito de afastamento nulo (onde supõe-se que a fonte e o detetor ocupam a mesma posição) são parâmetros suficientes na determinação do modelo geológico para meios com camadas horizontais. Por outro lado quando expresso através do formalismo estabelecido por Hamilton, os mesmos parâmetros (velocidade e tempo de afastamento nulo) são suficientes para determinar a função característica para este mesmo tipo de meio. Para o caso de um modelo geológico heterogêneo com interfaces arbitrariamente curvas, a função característica de Hamilton é dada a partir da estimativa de nove parâmetros, onde os mesmos parâmetros são necessários na determinação do modelo geológico em 3D. Este trabalho tem por objetivo estimar os parâmetros que determinam a função característica de Hamilton para meios 3D e estudar a influência de cada parâmetro na função, através de cortes horizontais nas seções de tempos de trânsito (conhecidos como time slices), nas configurações de ponto médio comum e afastamento nulo. Dentro desta abordagem é dado um exemplo a partir de um modelo sintético onde, aqueles resultados obtidos com estudo da influência de cada parâmetro na função característica, são aplicados como um critério de ajuste entre a função característica calculada e a função de tempos de trânsito obtida no levantamento de dados.

Bivariate gamma-geometric law and its induced Levy process

In this article we introduce a three-parameter extension of the bivariate exponential-geometric (BEG) law (Kozubowski and Panorska, 2005) [4]. We refer to this new distribution as the bivariate gamma-geometric (BGG) law. A bivariate random vector (X, N) follows the BGG law if N has geometric distribution and X may be represented (in law) as a sum of N independent and identically distributed gamma variables, where these variables are independent of N. Statistical properties such as moment generation and characteristic functions, moments and a variance-covariance matrix are provided. The marginal and conditional laws are also studied. We show that BBG distribution is infinitely divisible, just as the BEG model is. Further, we provide alternative representations for the BGG distribution and show that it enjoys a geometric stability property. Maximum likelihood estimation and inference are discussed and a reparametrization is proposed in order to obtain orthogonality of the parameters. We present an application to a real data set where our model provides a better fit than the BEG model. Our bivariate distribution induces a bivariate Levy process with correlated gamma and negative binomial processes, which extends the bivariate Levy motion proposed by Kozubowski et al. (2008) [6]. The marginals of our Levy motion are a mixture of gamma and negative binomial processes and we named it BMixGNB motion. Basic properties such as stochastic self-similarity and the covariance matrix of the process are presented. The bivariate distribution at fixed time of our BMixGNB process is also studied and some results are derived, including a discussion about maximum likelihood estimation and inference. (C) 2012 Elsevier Inc. All rights reserved.

The tangential variation of a localized flux-type eigenvalue problem

In this work the differentiability of the principal eigenvalue lambda = lambda(1)(Gamma) to the localized Steklov problem -Delta u + qu = 0 in Omega, partial derivative u/partial derivative nu = lambda chi(Gamma)(x)u on partial derivative Omega, where Gamma subset of partial derivative Omega is a smooth subdomain of partial derivative Omega and chi(Gamma) is its characteristic function relative to partial derivative Omega, is shown. As a key point, the flux subdomain Gamma is regarded here as the variable with respect to which such differentiation is performed. An explicit formula for the derivative of lambda(1) (Gamma) with respect to Gamma is obtained. The lack of regularity up to the boundary of the first derivative of the principal eigenfunctions is a further intrinsic feature of the problem. Therefore, the whole analysis must be done in the weak sense of H(1)(Omega). The study is of interest in mathematical models in morphogenesis. (C) 2011 Elsevier Inc. All rights reserved.

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.

POLYCHOTOMOUS LOGISTIC REGRESSION ANALYSIS (HYPERTENSION, CORONARY HEART DISEASE)

The history of the logistic function since its introduction in 1838 is reviewed, and the logistic model for a polychotomous response variable is presented with a discussion of the assumptions involved in its derivation and use. Following this, the maximum likelihood estimators for the model parameters are derived along with a Newton-Raphson iterative procedure for evaluation. A rigorous mathematical derivation of the limiting distribution of the maximum likelihood estimators is then presented using a characteristic function approach. An appendix with theorems on the asymptotic normality of sample sums when the observations are not identically distributed, with proofs, supports the presentation on asymptotic properties of the maximum likelihood estimators. Finally, two applications of the model are presented using data from the Hypertension Detection and Follow-up Program, a prospective, population-based, randomized trial of treatment for hypertension. The first application compares the risk of five-year mortality from cardiovascular causes with that from noncardiovascular causes; the second application compares risk factors for fatal or nonfatal coronary heart disease with those for fatal or nonfatal stroke. ^

Funciones de transferencia edafológica adaptadas a suelos de La Plata, Argentina

La información fácilmente obtenible para los suelos agrícolas son textura, contenido de materia orgánica y densidad aparente. Otras variables como la conductividad hidráulica saturada y la cantidad de agua almacenada en relación con el potencial agua del suelo son, en muchas ocasiones, difíciles de medir en el campo. Las funciones de transferencia edafológica (FTE) transforman datos asequibles en aquellos que necesitamos. Los objetivos de este trabajo fueron evaluar la aplicabilidad de FTE disponibles en la literatura a suelos de la zona de La Plata (Argentina) y desarrollar nuevas FTE para estos suelos. Se utilizaron datos obtenidos experimentalmente de retención hídrica, textura y materia orgánica. Las FTE seleccionadas para evaluar su eficacia estimativa en estos suelos fueron dos: una paramétrica (FTE de Saxton et al., 1986) y la otra de estimación puntual (FTE de Rawls et al., 1982). Para la FTE de Saxton et al. (7), en dos de las cuatro tensiones analizadas se encontraron diferencias significativas entre los valores medidos y los estimados. La FTE de Rawls et al. (6) para todas las tensiones estimó valores significativamente diferentes a los medidos. Se generó una FTE a partir de los datos generados de estimación puntual de retención hídrica a las tensiones estudiadas. La misma fue efectiva para las tensiones de 33, 100 y 1500 kPa.

Waves, analytical signals, and some postulates of quantum theory

In this paper we apply the formalism of the analytical signal theory to the Schrödinger wavefunction. Making use exclusively of the wave-particle duality and the rinciple of relativistic covariance, we actually derive the form of the quantum energy and momentum operators for a single nonrelativistic particle. Without using any more quantum postulates, and employing the formalism of the characteristic function, we also derive the quantum-mechanical prescription for the measurement probability in such cases.

On some Mixture Distributions

The aim of this paper is to establish some mixture distributions that arise in stochastic processes. Some basic functions associated with the probability mass function of the mixture distributions, such as k-th moments, characteristic function and factorial moments are computed. Further we obtain a three-term recurrence relation for each established mixture distribution.

Fundamental Investigations on the Isomorphism of Commutative Group Algebras in Bulgaria

The isomorphism problem of arbitrary algebraic structures plays always a central role in the study of a given algebraic object. In this paper we give the first investigations and also some basic results on the isomorphism problem of commutative group algebras in Bulgaria.

Triangular Models and Asymptotics of Continuous Curves with Bounded and Unbounded Semigroup Generators

2000 Mathematics Subject Classification: Primary 47A48, Secondary 60G12.

Estratificação de solos em camadas horizontais utilizando evolução diferencial

This work's objective is the development of a methodology to represent an unknown soil through a stratified horizontal multilayer soil model, from which the engineer may carry out eletrical grounding projects with high precision. The methodology uses the experimental electrical apparent resistivity curve, obtained through measurements on the ground, using a 4-wire earth ground resistance tester kit, along with calculations involving the measured resistance. This curve is then compared with the theoretical electrical apparent resistivity curve, obtained through calculations over a horizontally strati ed soil, whose parameters are conjectured. This soil model parameters, such as the number of layers, in addition to the resistivity and the thickness of each layer, are optimized by Differential Evolution method, with enhanced performance through parallel computing, in order to both apparent resistivity curves get close enough, and it is possible to represent the unknown soil through the multilayer horizontal soil model fitted with optimized parameters. In order to assist the Differential Evolution method, in case of a stagnation during an arbitrary amount of generations, an optimization process unstuck methodology is proposed, to expand the search space and test new combinations, allowing the algorithm to nd a better solution and/or leave the local minima. It is further proposed an error improvement methodology, in order to smooth the error peaks between the apparent resistivity curves, by giving opportunities for other more uniform solutions to excel, in order to improve the whole algorithm precision, minimizing the maximum error. Methodologies to verify the polynomial approximation of the soil characteristic function and the theoretical apparent resistivity calculations are also proposed by including middle points among the approximated ones in the verification. Finally, a statistical evaluation prodecure is presented, in order to enable the classication of soil samples. The soil stratification methodology is used in a control group, formed by horizontally stratified soils. By using statistical inference, one may calculate the amount of soils that, within an error margin, does not follow the horizontal multilayer model.