4,695 research outputs found

    Anticipated backward stochastic differential equations

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    In this paper we discuss new types of differential equations which we call anticipated backward stochastic differential equations (anticipated BSDEs). In these equations the generator includes not only the values of solutions of the present but also the future. We show that these anticipated BSDEs have unique solutions, a comparison theorem for their solutions, and a duality between them and stochastic differential delay equations.Comment: Published in at http://dx.doi.org/10.1214/08-AOP423 the Annals of Probability (http://www.imstat.org/aop/) by the Institute of Mathematical Statistics (http://www.imstat.org

    Anticipated BSDEs driven by fractional Brownian motion with time-delayed generator

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    This paper discusses a new type of anticipated backward stochastic differential equation with a time-delayed generator (DABSDEs, for short) driven by fractional Brownian motion, also known as fractional BSDEs, with Hurst parameter H∈(1/2,1)H\in(1/2,1), which extends the results of the anticipated backward stochastic differential equation to the case of the drive is fractional Brownian motion instead of a standard Brownian motion and in which the generator considers not only the present and future times but also the past time. By using the fixed point theorem, we will demonstrate the existence and uniqueness of the solutions to these equations. Moreover, we shall establish a comparison theorem for the solutions

    Optimal distributed control of a stochastic Cahn-Hilliard equation

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    We study an optimal distributed control problem associated to a stochastic Cahn-Hilliard equation with a classical double-well potential and Wiener multiplicative noise, where the control is represented by a source-term in the definition of the chemical potential. By means of probabilistic and analytical compactness arguments, existence of an optimal control is proved. Then the linearized system and the corresponding backward adjoint system are analysed through monotonicity and compactness arguments, and first-order necessary conditions for optimality are proved.Comment: Key words and phrases: stochastic Cahn-Hilliard equation, phase separation, optimal control, linearized state system, adjoint state system, first-order optimality condition

    Electromagnetic wave propagation in spatially homogeneous yet smoothly time-varying dielectric media

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    We explore the propagation and transformation of electromagnetic waves through spatially homogeneous yet smoothly time-dependent media within the framework of classical electrodynamics. By modelling the smooth transition, occurring during a finite period {\tau}, as a phenomenologically realistic and sigmoidal change of the dielectric permittivity, an analytically exact solution to Maxwell's equations is derived for the electric displacement in terms of hypergeometric functions. Using this solution, we show the possibility of amplification and attenuation of waves and associate this with the decrease and increase of the time-dependent permittivity. We demonstrate, moreover, that such an energy exchange between waves and non-stationary media leads to the transformation (or conversion) of frequencies. Our results may pave the way towards controllable light-matter interaction in time-varying structures.Comment: 5 figure

    Asymptotic Implied Volatility at the Second Order with Application to the SABR Model

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    We provide a general method to compute a Taylor expansion in time of implied volatility for stochastic volatility models, using a heat kernel expansion. Beyond the order 0 implied volatility which is already known, we compute the first order correction exactly at all strikes from the scalar coefficient of the heat kernel expansion. Furthermore, the first correction in the heat kernel expansion gives the second order correction for implied volatility, which we also give exactly at all strikes. As an application, we compute this asymptotic expansion at order 2 for the SABR model.Comment: 27 pages; v2: typos fixed and a few notation changes; v3: published version, typos fixed and comments added. in Large Deviations and Asymptotic Methods in Finance, Springer (2015) 37-6

    Long- and short-time asymptotics of the first-passage time of the Ornstein-Uhlenbeck and other mean-reverting processes

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    The first-passage problem of the Ornstein-Uhlenbeck process to a boundary is a long-standing problem with no known closed-form solution except in specific cases. Taking this as a starting-point, and extending to a general mean-reverting process, we investigate the long- and short-time asymptotics using a combination of Hopf-Cole and Laplace transform techniques. As a result we are able to give a single formula that is correct in both limits, as well as being exact in certain special cases. We demonstrate the results using a variety of other models
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