Search results for "stochastic"

Proportional Small Sample Bias in Pricing Kernel Estimations

2014

Numerous empirical studies find pricing kernels that are not-monotonically decreasing; the findings are at odds with the pricing kernel being marginal utility of a risk-averse, so-called representative agent. We study in detail the common procedure which estimates the pricing kernel as the ratio of two separate density estimations. In a first step, we analyze theoretically the functional dependence for the ratio of a density to its estimated density; this cautions the reader of potential computational issues coupled with statistical techniques. In a second step, we study this quantitatively; we show that small sample biases shape the estimated pricing kernel, and that estimated pricing kern…

Noncooperative dynamic games for inventory applications: A consensus approach

2008

We focus on a finite horizon noncooperative dynamic game where the stage cost of a single player associated to a decision is a monotonically nonincreasing function of the total number of players making the same decision. For the single-stage version of the game, we characterize Nash equilibria and derive a consensus protocol that makes the players converge to the unique Pareto optimal Nash equilibrium. Such an equilibrium guarantees the interests of the players and is also social optimal in the set of Nash equilibria. For the multi-stage version of the game, we present an algorithm that converges to Nash equilibria, unfortunately not necessarily Pareto optimal. The algorithm returns a seque…

Pricing of Forwards and Options in a Multivariate Non-Gaussian Stochastic Volatility Model for Energy Markets

2013

In Benth and Vos (2013) we introduced a multivariate spot price model with stochastic volatility for energy markets which captures characteristic features, such as price spikes, mean reversion, stochastic volatility, and inverse leverage effect as well as dependencies between commodities. In this paper we derive the forward price dynamics based on our multivariate spot price model, providing a very flexible structure for the forward curves, including contango, backwardation, and hump shape. Moreover, a Fourier transform-based method to price options on the forward is described.

Thermodynamic formalism and linear response theory for non-equilibrium steady states

2016

We study the linear response in systems driven away from thermal equilibrium into a nonequilibrium steady state with nonvanishing entropy production rate. A simple derivation of a general response formula is presented under the condition that the generating function describes a transformation that (to lowest order) preserves normalization and thus describes a physical stochastic process. For Markov processes we explicitly construct the conjugate quantities and discuss their relation with known response formulas. Emphasis is put on the formal analogy with thermodynamic potentials and some consequences are discussed.

Equivalent Non-Linearization of Hysteretic Systems by Means of RPS

2018

BackgroundThe analysis of elastoplastic systems with hardening (Bouc-Wen systems) under stochastic (seismic) loads needs the evaluation of higher order statistics even in the simplest case of normal distributed input. ObjectiveIn this paper, a non-linearization technique is proposed in order to evaluate the moments of any order of the response. MethodThis technique is developed by means of a nonlinear class of systems whose statistics are a priori known. The parameters of such systems can be chosen in such a way that the two systems are equivalent in a wide sense. Result & ConclusionIn the paper, the strategy to obtain the equivalence and the reliability of the results are discussed.

Fractional viscoelastic behaviour under stochastic temperature process

2018

Abstract This paper deals with the mechanical behaviour of a linear viscoelastic material modelled by a fractional Maxwell model and subject to a Gaussian stochastic temperature process. Two methods are introduced to evaluate the response in terms of strain of a material under a deterministic stress and subjected to a varying temperature. In the first approach the response is determined making the material parameters change at each time step, due to the temperature variation. The second method, takes advantage of the Time–Temperature Superposition Principle to lighten the calculations. In this regard, a stochastic characterisation for the Time–Temperature Superposition Principle method is p…

Lévy flights in confining potentials.

2009

We analyze confining mechanisms for L\'{e}vy flights. When they evolve in suitable external potentials their variance may exist and show signatures of a superdiffusive transport. Two classes of stochastic jump - type processes are considered: those driven by Langevin equation with L\'{e}vy noise and those, named by us topological L\'{e}vy processes (occurring in systems with topological complexity like folded polymers or complex networks and generically in inhomogeneous media), whose Langevin representation is unknown and possibly nonexistent. Our major finding is that both above classes of processes stay in affinity and may share common stationary (eventually asymptotic) probability densit…

Mapping of penetrometer resistance in relation to tractor traffic using multivariate geostatistics

2007

Abstract The traffic of agricultural machines can cause soil compaction and high variability of soil structure, both along normal lines and along those parallel to the field plane. The aim of this work was to investigate the potential of an electronic penetrometer, a GPS, a GIS and geostatistical techniques for mapping soil compaction. In July 2003 soil cone penetrometer resistance was measured using a semi-automatic electronic penetrometer in a sandy-silt soil (Vertic Xerochrept) of inland Sicily where a three-year rotation wheat ( Triticum durum Desf.)–wheat–tomato ( Solanum lycopersicum L.) was practiced. The measurements were carried out along three parallel 3-m long transects, from the…

European Option Pricing with Transaction Costs and Stochastic Volatility: an Asymptotic Analysis

2015

In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the option price is obtained. While the dominant term in the expansion it is shown to be the classical Black and Scholes solution, the correction terms appear at $O(\varepsilon^{1/2})$ and $O(\varepsilon)$. The optimal hedging strategy is then explicitly obtained for the Scott's model.

Noisy dynamics in long and short Josephson junctions

The study of nonlinear dynamics in long Josephson junctions and the features of a particular kind of junction realized using a graphene layer, are the main topics of this research work. The superconducting state of a Josephson junction is a metastable state, and the switching to the resistive state is directly related to characteristic macroscopic quantities, such as the current the voltage across the junction, and the magnetic field through it. Noise sources can affect the mean lifetime of this superconducting metastable state, so that noise induced effects on the transient dynamics of these systems should be taken into account. The long Josephson junctions are investigated in the sine-Gor…