We introduce an explicitly solvable multiscale stochastic volatility model that generalizes the Heston model. The model describes the dynamics of an asset price and of its two stochastic variances using a system of three Ito stochastic
Option Pricing and Calibration Problems 863Journal of Futures Markets DOI: 10.1002/fut differential equations. The two stochastic variances vary on two distinct time scales and can be regarded as auxiliary variables introduced to model the dynamics of the asset price. Under some assumptions, the transition probability density function of the stochastic process solution of the model is represented as a onedimensional integral of an explicitly known integrand. In this sense the model is explicitly solvable. We consider the risk-neutral measure associated with the proposed multiscale stochastic volatility model and derive formulae to price European vanilla options (call and put) in the multiscale stochastic volatility model considered. We use the thus-obtained option price formulae to study the calibration problem, that is to study the values of the model parameters, the correlation coefficients of the Wiener processes defining the model, and the initial stochastic variances implied by the "observed" option prices using both synthetic and real data. In the analysis of real data, we use the S&P 500 index and to the prices of the corresponding options in the year 2005. The web site http://www.econ.univpm.it/recchioni/finance/w7 contains some auxiliary material including some animations that helps the understanding of this article. A more general reference to the work of the authors and their coauthors in mathematical finance is the web site
A masking problem in time dependent three dimensional acoustic obstacle scattering is considered. The masking problem consists in making masked a bounded scatterer characterized by an acoustic boundary impedance and immersed in a homogeneous isotropic medium that, when hit by an incident acoustic field, generates a scattered acoustic field. The precise definition of the masking problem is given later. This problem has been formulated as an optimal control problem for the wave equation. The corresponding first order optimality condition is derived and solved with a highly parallelizable numerical method. Some numerical experience on a test problem is shown. (C) 2004 Acoustical Society of America
Abstract. In a recent paper [4] we have proposed and analysed a suitable mathematical model which describes the coupling of the Navier-Stokes with the Oseen equations. In this paper we propose a numerical solution of the coupled problem by subdomain splitting. After a preliminary analysis, we prove a convergence result for an iterative algorithm that alternates the solution of the Navier-Stokes problem to the one of the Oseen problem.Mathematics Subject Classification. 76D05, 65M55, 65M60, 65M70.
In this work, we apply a semi-Lagrangian spectral method for the Vlasov-Poisson system, previously designed for periodic Fourier discretizations, by implementing Legendre polynomials and Hermite functions in the approximation of the distribution function with respect to the velocity variable. We discuss second-order accurate-in-time schemes, obtained by coupling spectral techniques in the space-velocity domain with a BDF time-stepping scheme. The resulting method possesses good conservation properties, which have been assessed by a series of numerical tests conducted on the standard two-stream instability benchmark problem. In the Hermite case, we also investigate the numerical behavior in dependence of a scaling parameter in the Gaussian weight. Confirming previous results from the literature, our experiments for different representative values of this parameter, indicate that a proper choice may significantly impact on accuracy, thus suggesting that suitable strategies should be developed to automatically update the parameter during the time-advancing procedure.
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