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 Mathematics , 2015, Abstract: This paper examines issues of data completion and location uncertainty, popular in many practical PDE-based inverse problems, in the context of option calibration via recovery of local volatility surfaces. While real data is usually more accessible for this application than for many others, the data is often given only at a restricted set of locations. We show that attempts to "complete missing data" by approximation or interpolation, proposed in the literature, may produce results that are inferior to treating the data as scarce. Furthermore, model uncertainties may arise which translate to uncertainty in data locations, and we show how a model-based adjustment of the asset price may prove advantageous in such situations. We further compare a carefully calibrated Tikhonov-type regularization approach against a similarly adapted EnKF method, in an attempt to fine-tune the data assimilation process. The EnKF method offers reassurance as a different method for assessing the solution in a problem where information about the true solution is difficult to come by. However, additional advantage in the latter approach turns out to be limited in our context.
 Quantitative Finance , 2010, Abstract: In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the path integral method, proposed B. Baaquie, and generalized it to the case of path-dependent options, where the payoff function depends on the history of changes in the underlying asset. The dependence of the implied volatility on the parameters of the stochastic volatility model has been studied. It is shown that with proper choice of model parameters one can accurately reproduce the actual behavior of implied volatility. As a consequence, it can assess more accurately the value of options. It should be noted that the methods developed here allow evaluating options with any payoff function.
 Erhan Bayraktar Mathematics , 2007, Abstract: We prove that the perpetual American put option price of level dependent volatility model with compound Poisson jumps is convex and is the classical solution of its associated quasi-variational inequality, that it is $C^2$ except at the stopping boundary and that it is $C^1$ everywhere (i.e. the smooth pasting condition always holds).
 Physics , 2006, DOI: 10.1103/PhysRevE.76.056105 Abstract: The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable and only the price is known. Diffusion theory has many common points with the research on volatility, the key of the analogy being that volatility is the time-dependent diffusion coefficient of the random walk for the price return. We present a formal procedure to extract volatility from price data, by assuming that it is described by a hidden Markov process which together with the price form a two-dimensional diffusion process. We derive a maximum likelihood estimate valid for a wide class of two-dimensional diffusion processes. The choice of the exponential Ornstein-Uhlenbeck (expOU) stochastic volatility model performs remarkably well in inferring the hidden state of volatility. The formalism is applied to the Dow Jones index. The main results are: (i) the distribution of estimated volatility is lognormal, which is consistent with the expOU model; (ii) the estimated volatility is related to trading volume by a power law of the form $\sigma \propto V^{0.55}$; and (iii) future returns are proportional to the current volatility which suggests some degree of predictability for the size of future returns.
 Physics , 2007, DOI: 10.1103/PhysRevE.78.051304 Abstract: The coefficient of normal restitution of colliding viscoelastic spheres is computed as a function of the material properties and the impact velocity. From simple arguments it becomes clear that in a collision of purely repulsively interacting particles, the particles loose contact slightly before the distance of the centers of the spheres reaches the sum of the radii, that is, the particles recover their shape only after they lose contact with their collision partner. This effect was neglected in earlier calculations which leads erroneously to attractive forces and, thus, to an underestimation of the coefficient of restitution. As a result we find a novel dependence of the coefficient of restitution on the impact rate.
 Journal of Mining and Metallurgy, Section B : Metallurgy , 2009, DOI: 10.2298/jmmb0901069t Abstract: In order to increase the active surface of platinum catalysts for ammonia oxidation and on the basis of theoretic considerations and tests in industrial environment, we have finally decided on their specific design. Efficiency on the newly designed catalyst was checked in industrial circumstances. A comparative analysis of the total ammonia recovery coefficient between the mentioned new catalysts and previously applied platinum catalysts was carried out. All advantages of catalysts with increased active surfaces were confirmed and a new method of their manufacturing process was selected.
 Sebastian Acosta Mathematics , 2013, DOI: 10.3934/ipi.2015.9.289 Abstract: In this paper, we investigate the recovery of the absorption coefficient from boundary data assuming that the region of interest is illuminated at an initial time. We consider a sufficiently strong and isotropic, but otherwise unknown initial state of radiation. This work is part of an effort to reconstruct optical properties using unknown illumination embedded in the unknown medium. We break the problem into two steps. First, in a linear framework, we seek the simultaneous recovery of a forcing term of the form $\sigma(t,x,\theta) f(x)$ (with $\sigma$ known) and an isotropic initial condition $u_{0}(x)$ using the single measurement induced by these data. Based on exact boundary controllability, we derive a system of equations for the unknown terms $f$ and $u_{0}$. The system is shown to be Fredholm if $\sigma$ satisfies a certain positivity condition. We show that for generic term $\sigma$ and weakly absorbing media, this linear inverse problem is uniquely solvable with a stability estimate. In the second step, we use the stability results from the linear problem to address the nonlinearity in the recovery of a weak absorbing coefficient. We obtain a locally Lipschitz stability estimate.
 Computer Science , 2013, Abstract: Consider the problem of learning the drift coefficient of a $p$-dimensional stochastic differential equation from a sample path of length $T$. We assume that the drift is parametrized by a high-dimensional vector, and study the support recovery problem when both $p$ and $T$ can tend to infinity. In particular, we prove a general lower bound on the sample-complexity $T$ by using a characterization of mutual information as a time integral of conditional variance, due to Kadota, Zakai, and Ziv. For linear stochastic differential equations, the drift coefficient is parametrized by a $p\times p$ matrix which describes which degrees of freedom interact under the dynamics. In this case, we analyze a $\ell_1$-regularized least squares estimator and prove an upper bound on $T$ that nearly matches the lower bound on specific classes of sparse matrices.
 Quantitative Finance , 2015, Abstract: We study the finite horizon Merton portfolio optimization problem in a general local-stochastic volatility setting. Using model coefficient expansion techniques, we derive approximations for the both the value function and the optimal investment strategy. We also analyze the `implied Sharpe ratio' and derive a series approximation for this quantity. The zeroth-order approximation of the value function and optimal investment strategy correspond to those obtained by Merton (1969) when the risky asset follows a geometric Brownian motion. The first-order correction of the value function can, for general utility functions, be expressed as a differential operator acting on the zeroth-order term. For power utility functions, higher order terms can also be computed as a differential operator acting on the zeroth-order term. We give a rigorous accuracy bound for the higher order approximations in this case in pure stochastic volatility models. A number of examples are provided in order to demonstrate numerically the accuracy of our approximations.
 Wolfgang Putschoegl Quantitative Finance , 2010, Abstract: We consider stochastic volatility models using piecewise constant parameters. We suggest a hybrid optimization algorithm for fitting the models to a volatility surface and provide some numerical results. Finally, we provide an outlook on how to further improve the calibration procedure.
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