22,656 research outputs found
Nonlinear Parabolic Equations arising in Mathematical Finance
This survey paper is focused on qualitative and numerical analyses of fully
nonlinear partial differential equations of parabolic type arising in financial
mathematics. The main purpose is to review various non-linear extensions of the
classical Black-Scholes theory for pricing financial instruments, as well as
models of stochastic dynamic portfolio optimization leading to the
Hamilton-Jacobi-Bellman (HJB) equation. After suitable transformations, both
problems can be represented by solutions to nonlinear parabolic equations.
Qualitative analysis will be focused on issues concerning the existence and
uniqueness of solutions. In the numerical part we discuss a stable
finite-volume and finite difference schemes for solving fully nonlinear
parabolic equations.Comment: arXiv admin note: substantial text overlap with arXiv:1603.0387
Solving Nonlinear Parabolic Equations by a Strongly Implicit Finite-Difference Scheme
We discuss the numerical solution of nonlinear parabolic partial differential
equations, exhibiting finite speed of propagation, via a strongly implicit
finite-difference scheme with formal truncation error . Our application of interest is the spreading of
viscous gravity currents in the study of which these type of differential
equations arise. Viscous gravity currents are low Reynolds number (viscous
forces dominate inertial forces) flow phenomena in which a dense, viscous fluid
displaces a lighter (usually immiscible) fluid. The fluids may be confined by
the sidewalls of a channel or propagate in an unconfined two-dimensional (or
axisymmetric three-dimensional) geometry. Under the lubrication approximation,
the mathematical description of the spreading of these fluids reduces to
solving the so-called thin-film equation for the current's shape . To
solve such nonlinear parabolic equations we propose a finite-difference scheme
based on the Crank--Nicolson idea. We implement the scheme for problems
involving a single spatial coordinate (i.e., two-dimensional, axisymmetric or
spherically-symmetric three-dimensional currents) on an equispaced but
staggered grid. We benchmark the scheme against analytical solutions and
highlight its strong numerical stability by specifically considering the
spreading of non-Newtonian power-law fluids in a variable-width confined
channel-like geometry (a "Hele-Shaw cell") subject to a given mass
conservation/balance constraint. We show that this constraint can be
implemented by re-expressing it as nonlinear flux boundary conditions on the
domain's endpoints. Then, we show numerically that the scheme achieves its full
second-order accuracy in space and time. We also highlight through numerical
simulations how the proposed scheme accurately respects the mass
conservation/balance constraint.Comment: 36 pages, 9 figures, Springer book class; v2 includes improvements
and corrections; to appear as a contribution in "Applied Wave Mathematics II
Transformation Method for Solving Hamilton-Jacobi-Bellman Equation for Constrained Dynamic Stochastic Optimal Allocation Problem
In this paper we propose and analyze a method based on the Riccati
transformation for solving the evolutionary Hamilton-Jacobi-Bellman equation
arising from the stochastic dynamic optimal allocation problem. We show how the
fully nonlinear Hamilton-Jacobi-Bellman equation can be transformed into a
quasi-linear parabolic equation whose diffusion function is obtained as the
value function of certain parametric convex optimization problem. Although the
diffusion function need not be sufficiently smooth, we are able to prove
existence, uniqueness and derive useful bounds of classical H\"older smooth
solutions. We furthermore construct a fully implicit iterative numerical scheme
based on finite volume approximation of the governing equation. A numerical
solution is compared to a semi-explicit traveling wave solution by means of the
convergence ratio of the method. We compute optimal strategies for a portfolio
investment problem motivated by the German DAX 30 Index as an example of
application of the method
Preconditioned fully implicit PDE solvers for monument conservation
Mathematical models for the description, in a quantitative way, of the
damages induced on the monuments by the action of specific pollutants are often
systems of nonlinear, possibly degenerate, parabolic equations. Although some
the asymptotic properties of the solutions are known, for a short window of
time, one needs a numerical approximation scheme in order to have a
quantitative forecast at any time of interest. In this paper a fully implicit
numerical method is proposed, analyzed and numerically tested for parabolic
equations of porous media type and on a systems of two PDEs that models the
sulfation of marble in monuments. Due to the nonlinear nature of the underlying
mathematical model, the use of a fixed point scheme is required and every step
implies the solution of large, locally structured, linear systems. A special
effort is devoted to the spectral analysis of the relevant matrices and to the
design of appropriate iterative or multi-iterative solvers, with special
attention to preconditioned Krylov methods and to multigrid procedures.
Numerical experiments for the validation of the analysis complement this
contribution.Comment: 26 pages, 13 figure
A linear domain decomposition method for partially saturated flow in porous media
The Richards equation is a nonlinear parabolic equation that is commonly used
for modelling saturated/unsaturated flow in porous media. We assume that the
medium occupies a bounded Lipschitz domain partitioned into two disjoint
subdomains separated by a fixed interface . This leads to two problems
defined on the subdomains which are coupled through conditions expressing flux
and pressure continuity at . After an Euler implicit discretisation of
the resulting nonlinear subproblems a linear iterative (-type) domain
decomposition scheme is proposed. The convergence of the scheme is proved
rigorously. In the last part we present numerical results that are in line with
the theoretical finding, in particular the unconditional convergence of the
scheme. We further compare the scheme to other approaches not making use of a
domain decomposition. Namely, we compare to a Newton and a Picard scheme. We
show that the proposed scheme is more stable than the Newton scheme while
remaining comparable in computational time, even if no parallelisation is being
adopted. Finally we present a parametric study that can be used to optimize the
proposed scheme.Comment: 34 pages, 13 figures, 7 table
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