Sampled Control for Mean-Variance Hedging in a Jump Diffusion Financial Market

In this technical note we consider the mean-variance hedging problem of a jump diffusion continuous state space financial model with the re-balancing strategies for the hedging portfolio taken at discrete times, a situation that more closely reflects real market conditions. A direct expression based on some change of measures, not depending on any recursions, is derived for the optimal hedging strategy as well as for the ""fair hedging price"" considering any given payoff. For the case of a European call option these expressions can be evaluated in a closed form.

On the Filtering Problem for Continuous-Time Markov Jump Linear Systems with no Observation of the Markov Chain

We consider in this paper the optimal stationary dynamic linear filtering problem for continuous-time linear systems subject to Markovian jumps in the parameters (LSMJP) and additive noise (Wiener process). It is assumed that only an output of the system is available and therefore the values of the jump parameter are not accessible. It is a well known fact that in this setting the optimal nonlinear filter is infinite dimensional, which makes the linear filtering a natural numerically, treatable choice. The goal is to design a dynamic linear filter such that the closed loop system is mean square stable and minimizes the stationary expected value of the mean square estimation error. It is shown that an explicit analytical solution to this optimal filtering problem is obtained from the stationary solution associated to a certain Riccati equation. It is also shown that the problem can be formulated using a linear matrix inequalities (LMI) approach, which can be extended to consider convex polytopic uncertainties on the parameters of the possible modes of operation of the system and on the transition rate matrix of the Markov process. As far as the authors are aware of this is the first time that this stationary filtering problem (exact and robust versions) for LSMJP with no knowledge of the Markov jump parameters is considered in the literature. Finally, we illustrate the results with an example.

Generalized Coupled Algebraic Riccati Equations for Discrete-time Markov Jump with Multiplicative Noise Systems

In this paper we consider the existence of the maximal and mean square stabilizing solutions for a set of generalized coupled algebraic Riccati equations (GCARE for short) associated to the infinite-horizon stochastic optimal control problem of discrete-time Markov jump with multiplicative noise linear systems. The weighting matrices of the state and control for the quadratic part are allowed to be indefinite. We present a sufficient condition, based only on some positive semi-definite and kernel restrictions on some matrices, under which there exists the maximal solution and a necessary and sufficient condition under which there exists the mean square stabilizing solution fir the GCARE. We also present a solution for the discounted and long run average cost problems when the performance criterion is assumed be composed by a linear combination of an indefinite quadratic part and a linear part in the state and control variables. The paper is concluded with a numerical example for pension fund with regime switching.

Bubbly Flow Structure in Hydraulic Jump

In an open channel, a hydraulic jump is the rapid transition from super- to sub-critical flow associated with strong turbulence and air bubble entrainment in the mixing layer. New experiments were performed at relatively large Reynolds numbers using phase-detection probes. Some new signal analysis provided characteristic air-water time and length scales of the vortical structures advecting the air bubbles in the developing shear flow. An analysis of the longitudinal air-water flow structure suggested little bubble clustering in the mixing layer, although an interparticle arrival time analysis showed some preferential bubble clustering for small bubbles with chord times below 3 ms. Correlation analyses yielded longitudinal air-water time scales Txx*V1/d1 of about 0.8 in average. The transverse integral length scale Z/d1 of the eddies advecting entrained bubbles was typically between 0.25 and 0.4, irrespective of the inflow conditions within the range of the investigations. Overall the findings highlighted the complicated nature of the air-water flow

Experimental Analysis of Froude Number Effect on Air Entrainment in the Hydraulic Jump

A hydraulic jump is characterized by strong energy dissipation and mixing, large-scale turbulence, air entrainment, waves and spray. Despite recent pertinent studies, the interaction between air bubbles diffusion and momentum transfer is not completely understood. The objective of this paper is to present experimental results from new measurements performed in rectangular horizontal flume with partially-developed inflow conditions. The vertical distributions of void fraction and air bubbles count rate were recorded for inflow Froude number Fr1 in the range from 5.2 to 14.3. Rapid detrainment process was observed near the jump toe, whereas the structure of the air diffusion layer was clearly observed over longer distances. These new data were compared with previous data generally collected at lower Froude numbers. The comparison demonstrated that, at a fixed distance from the jump toe, the maximum void fraction Cmax increases with the increasing Fr1. The vertical locations of the maximum void fraction and bubble count rate were consistent with previous studies. Finally, an empirical correlation between the upper boundary of the air diffusion layer and the distance from the impingement point was provided.

Clustering Process Analysis in a Large-Size Dropshaft and in a Hydraulic Jump

Recent efforts in the characterization of air-water flows properties have included some clustering process analysis. A cluster of bubbles is defined as a group of two or more bubbles, with a distinct separation from other bubbles before and after the cluster. The present paper compares the results of clustering processes two hydraulic structures. That is, a large-size dropshaft and a hydraulic jump in a rectangular horizontal channel. The comparison highlighted some significant differences in clustering production and structures. Both dropshaft and hydraulic jump flows are complex turbulent shear flows, and some clustering index may provide some measure of the bubble-turbulence interactions and associated energy dissipation.

Learning the ropes and embracing the rules: CFSP institutions as arenas for learning and strategic socialisation

The aim of this article is to analyse those situations in which learning and socialisation take place within the context of the Common Foreign and Security Policy (CFSP), in particular, at the level of experts in the Council Working Groups. Learning can explain the institutional development of CFSP and changes in the foreign policies of the Member States. Some scope conditions for learning and channels of institutionalisation are identified. Socialisation, resulting from learning within a group, is perceived as a strategic action by reflective actors. National diplomats, once they arrive in Brussels, learn the new code of conduct of their Working Groups. They are embedded in two environments and faced with two logics: the European one in the Council and the national one in the Ministries of Foreign Affairs (MFA). The empirical evidence supports the argument that neither rational nor sociological approaches alone can account for these processes.

From a mono to a digenetic life-cycle: how was the jump for flagellates of the family trypanosomatidae?

It has been found that species of the digenetic genus Trypanosoma as well as species of monogenetic trypanosomatids of insects can grow in the lumen of the scent glands of opossums reproducing the cycle they perform in the intestinal tract of their insect hosts. Based on these findings, speculations are made on the incompletely known cycles of many mammalian trypanosomes and on the evolution of the family Trypanosomatidae.

Adaptive Continuous time Markov Chain Approximation Model to General Jump-Diusions

We propose a non-equidistant Q rate matrix formula and an adaptive numerical algorithm for a continuous time Markov chain to approximate jump-diffusions with affine or non-affine functional specifications. Our approach also accommodates state-dependent jump intensity and jump distribution, a flexibility that is very hard to achieve with other numerical methods. The Kolmogorov-Smirnov test shows that the proposed Markov chain transition density converges to the one given by the likelihood expansion formula as in Ait-Sahalia (2008). We provide numerical examples for European stock option pricing in Black and Scholes (1973), Merton (1976) and Kou (2002).

Mutigrid preconditioner for nonconforming discretization of elliptic problems with jump coefficients

In this paper, we present a multigrid preconditioner for solving the linear system arising from the piecewise linear nonconforming Crouzeix-Raviart discretization of second order elliptic problems with jump coe fficients. The preconditioner uses the standard conforming subspaces as coarse spaces. Numerical tests show both robustness with respect to the jump in the coe fficient and near-optimality with respect to the number of degrees of freedom.

Influence of initial foot dorsal flexion on vertical jump and running performance.

Several studies (on an inclined platform or with special shoes) have reported improved jump performance when the ankle was in a dorsiflexion (DF) position. The present study aims to test whether shoes inducing moderate DF modify vertical jump performance and energy cost. Twenty-one young, healthy female subjects (30 +/- 6 yr, 58 +/- 6 kg, O2max 45 +/- 3 mLxkg-1xmin-1, mean +/- SD) participated in the study. Jump performance was tested with subjects either wearing 4 degrees DF or standard (S) shoes. The jump tests (performed on a force platform) consisted of squat jump (SJ), countermovement jump (CMJ), and continuous jumps (CJ) during 15 seconds. Measured parameters were jump height, speed at take off, and maximal and average power. Oxygen uptake was measured on a treadmill while subjects ran at 95% of the anaerobic threshold during a 7-minute steady-state period. As compared with S shoes, DF shoes significantly improved the height of SJ (31 +/- 4 cm vs. 34 +/- 4 cm, p = 0.0001), CMJ (32 +/- 4 cm vs. 34 +/- 4 cm, p = 0.0004), and CJ (17.5 +/- 4.2 cm vs. 22.0 +/- 6.0 cm, p = 0.0001). Speed at take off was also significantly higher. Mean power significantly increased in SJ and CJ but not in CMJ. Oxygen uptake was not different between conditions (p = 0.40). Dorsiflexion shoes induce a significant increase in jump performance. These results are in accordance with the concept that a DF of the ankle may induce an increase of the length and strength of the triceps surae (higher torque). However, wearing DF shoes did not require more energy during running. Dorsiflexion shoes could be used to increase jump performance in several sports such as volleyball in which jump height is essential.

On the term structure of Interbank interest rates: Jump-diffusion processes and option pricing

In this paper we study the dynamic behavior of the term structureof Interbank interest rates and the pricing of options on interest ratesensitive securities. We posit a generalized single factor model withjumps to take into account external influences in the market. Daily datais used to test for jump effects. Qualitative examination of the linkagebetween Monetary Authorities' interventions and jumps are studied. Pricingresults suggests a systematic underpricing in bonds and call options ifthe jumps component is not included. However, the pricing of put optionson bonds presents indeterminacies.

A Hull and White formula for a general stochastic volatility jump-diffusion model with applications to the study of the short-time behavior of the implied volatility

In this paper, generalizing results in Alòs, León and Vives (2007b), we see that the dependence of jumps in the volatility under a jump-diffusion stochastic volatility model, has no effect on the short-time behaviour of the at-the-money implied volatility skew, although the corresponding Hull and White formula depends on the jumps. Towards this end, we use Malliavin calculus techniques for Lévy processes based on Løkka (2004), Petrou (2006), and Solé, Utzet and Vives (2007).