Option valuation as an expectation in the complex domain: The Black-Scholes case

It is very well known that the first succesful valuation of a stock option was done by solving a deterministic partial differential equation (PDE) of the parabolic type with some complementary conditions specific for the option. In this approach, the randomness in the option value process is eliminated through a no-arbitrage argument. An alternative approach is to construct a replicating portfolio for the option. From this viewpoint the payoff function for the option is a random process which, under a new probabilistic measure, turns out to be of a special type, a martingale. Accordingly, the value of the replicating portfolio (equivalently, of the option) is calculated as an expectation, with respect to this new measure, of the discounted value of the payoff function. Since the expectation is, by definition, an integral, its calculation can be made simpler by resorting to powerful methods already available in the theory of analytic functions. In this paper we use precisely two of those techniques to find the well-known value of a European call

Power variation of some integral fractional processes

We consider the asymptotic behaviour of the realized power variation of processes of the form ¿t0usdBHs, where BH is a fractional Brownian motion with Hurst parameter H E(0,1), and u is a process with finite q-variation, q<1/(1¿H). We establish the stable convergence of the corresponding fluctuations. These results provide new statistical tools to study and detect the long-memory effect and the Hurst parameter.

Stochastic differential equations with random coefficients

In this paper we establish the existence and uniqueness of a solution for different types of stochastic differential equation with random initial conditions and random coefficients. The stochastic integral is interpreted as a generalized Stratonovich integral, and the techniques used to derive these results are mainly based on the path properties of the Brownian motion, and the definition of the Stratonovich integral.

Approximation and support theorem for a wave equation in two space dimensions

We prove a characterization of the support of the law of the solution for a stochastic wave equation with two-dimensional space variable, driven by a noise white in time and correlated in space. The result is a consequence of an approximation theorem, in the convergence of probability, for equations obtained by smoothing the random noise. For some particular classes of coefficients, approximation in the Lp-norm for p¿1 is also proved.

Stochastic delay differential equations driven by fractional Brownian motion with Hurst parameter H 1/2

We consider the Cauchy problem for a stochastic delay differential equation driven by a fractional Brownian motion with Hurst parameter H>¿. We prove an existence and uniqueness result for this problem, when the coefficients are sufficiently regular. Furthermore, if the diffusion coefficient is bounded away from zero and the coefficients are smooth functions with bounded derivatives of all orders, we prove that the law of the solution admits a smooth density with respect to Lebesgue measure on R.

Instrumentation and Monitoring of Precast Bridge Approach Tied to an Integral Abutment Bridge in Bremer County, SPR 0000-005, 2010

Approach slab pavement at integral abutment (I-A) bridges are prone to settlement and cracking, which has been long recognized by the Iowa Department of Transportation (DOT). A commonly recommended solution is to integrally attach the approach slab to the bridge abutment. This study sought to supplement a previous project by instrumenting, monitoring, and analyzing the behavior of an approach slab tied to a integral abutment bridge. The primary objective of this investigation was to evaluate the performance of the approach slab. To satisfy the research needs, the project scope involved reviewing a similar previous study, implementing a health monitoring system on the approach slab, interpreting the data obtained during the evaluation, and conducting periodic visual inspections of the bridge and approach slab. Based on the information obtained from the testing, the following general conclusions were made: the integral connection between the approach slab and the bridge appears to function well with no observed distress at this location and no relative longitudinal movement measured between the two components; the measured strains in the approach slabs indicate a force exists at the expansion joint and should be taken into consideration when designing both the approach slab and the bridge and the observed responses generally followed an annual cyclic and/or short term cyclic pattern over time; the expansion joint at one side of the approach slab does not appear to be functioning as well as elsewhere; much larger frictional forces were observed in this study compared to the previous study.

Pile Design and Tests for Integral Abutment Bridges, HR-273, 1987

Expansion joints increase both the initial cost and the maintenance cost of bridges. Integral abutment bridges provide an attractive design alternative because expansion joints are eliminated from the bridge itself. However, the piles in these bridges are subjected to horizontal movement as the bridge expands and contracts during temperature changes. The objective of this research was to develop a method of designing piles for these conditions. Separate field tests simulating a pile and a bridge girder were conducted for three loading cases: (1) vertical load only, (2) horizontal displacement of pile head only, and (3) combined horizontal displacement of pile head with subsequent vertical load. Both tests (1) and (3) reached the same ultimate vertical load, that is, the horizontal displacement had no effect on the vertical load capacity. Several model tests were conducted in sand with a scale factor of about 1:10. Experimental results from both the field and model tests were used to develop the vertical and horizontal load-displacement properties of the soil. These properties were input into the finite element computer program Integral Abutment Bridge Two-Dimensional (IAB2D), which was developed under a previous research contract. Experimental and analytical results compared well for the test cases. Two alternative design methods, both based upon the American Association of State Highway and Transportation Officials (AASHTO) Specification, were developed. Alternative One is quite conservative relative to IAB2D results and does not permit plastic redistribution of forces. Alternative Two is also conservative when compared to IAB2D, but plastic redistribution is permitted. To use Alternative Two, the pile cross section must have sufficient inelastic rotation capacity before local buckling occurs. A design example for a friction pile and an end-bearing pile illustrates both alternatives.

Validation of Design Recommendations for Integral Abutment Piles, HR-292, 1989

Since integral abutment bridges decrease the initial and maintenance costs of bridges, they provide an attractive alternative for bridge designers. The objective of this project is to develop rational and experimentally verified design recommendations for these bridges. Field testing consisted of instrumenting two bridges in Iowa to monitor air and bridge temperatures, bridge displacements, and pile strains. Core samples were also collected to determine coefficients of thermal expansion for the two bridges. Design values for the coefficient of thermal expansion of concrete are recommended, as well as revised temperature ranges for the deck and girders of steel and concrete bridges. A girder extension model is developed to predict the longitudinal bridge displacements caused by changing bridge temperatures. Abutment rotations and passive soil pressures behind the abutment were neglected. The model is subdivided into segments that have uniform temperatures, coefficients of expansion, and moduli of elasticity. Weak axis pile strains were predicted using a fixed-head model. The pile is idealized as an equivalent cantilever with a length determined by the surrounding soil conditions and pile properties. Both the girder extension model and the fixed-head model are conservative for design purposes. A longitudinal frame model is developed to account for abutment rotations. The frame model better predicts both the longitudinal displacement and weak axis pile strains than do the simpler models. A lateral frame model is presented to predict the lateral motion of skewed bridges and the associated strong axis pile strains. Full passive soil pressure is assumed on the abutment face. Two alternatives for the pile design are presented. Alternative One is the more conservative and includes thermally induced stresses. Alternative Two neglects thermally induced stresses but allows for the partial formation of plastic hinges (inelastic redistribution of forces). Ductility criteria are presented for this alternative. Both alternatives are illustrated in a design example.

Coisotropic regularization of singular Lagrangians

We present an alternative approach to the usual treatments of singular Lagrangians. It is based on a Hamiltonian regularization scheme inspired on the coisotropic embedding of presymplectic systems. A Lagrangian regularization of a singular Lagrangian is a regular Lagrangian defined on an extended velocity phase space that reproduces the original theory when restricted to the initial configuration space. A Lagrangian regularization does not always exists, but a family of singular Lagrangians is studied for which such a regularization can be described explicitly. These regularizations turn out to be essentially unique and provide an alternative setting to quantize the corresponding physical systems. These ideas can be applied both in classical mechanics and field theories. Several examples are discussed in detail. 1995 American Institute of Physics.