Fast Estimation of True Bounds on Bermudan Option Prices under Jump-diffusion Processes

Fast pricing of American-style options has been a difficult problem since it was first introduced to financial markets in 1970s, especially when the underlying stocks' prices follow some jump-diffusion processes. In this paper, we propose a new algorithm to generate tight upper bounds on the Bermudan option price without nested simulation, under the jump-diffusion setting. By exploiting the martingale representation theorem for jump processes on the dual martingale, we are able to explore the unique structure of the optimal dual martingale and construct an approximation that preserves the martingale property. The resulting upper bound estimator avoids the nested Monte Carlo simulation suffered by the original primal-dual algorithm, therefore significantly improves the computational efficiency. Theoretical analysis is provided to guarantee the quality of the martingale approximation. Numerical experiments are conducted to verify the efficiency of our proposed algorithm

Multi-Valued Verification of Strategic Ability

Some multi-agent scenarios call for the possibility of evaluating specifications in a richer domain of truth values. Examples include runtime monitoring of a temporal property over a growing prefix of an infinite path, inconsistency analysis in distributed databases, and verification methods that use incomplete anytime algorithms, such as bounded model checking. In this paper, we present multi-valued alternating-time temporal logic (mv-ATL*), an expressive logic to specify strategic abilities in multi-agent systems. It is well known that, for branching-time logics, a general method for model-independent translation from multi-valued to two-valued model checking exists. We show that the method cannot be directly extended to mv-ATL*. We also propose two ways of overcoming the problem. Firstly, we identify constraints on formulas for which the model-independent translation can be suitably adapted. Secondly, we present a model-dependent reduction that can be applied to all formulas of mv-ATL*. We show that, in all cases, the complexity of verification increases only linearly when new truth values are added to the evaluation domain. We also consider several examples that show possible applications of mv-ATL* and motivate its use for model checking multi-agent systems

High order filtering methods for approximating hyberbolic systems of conservation laws

In the computation of discontinuous solutions of hyperbolic systems of conservation laws, the recently developed essentially non-oscillatory (ENO) schemes appear to be very useful. However, they are computationally costly compared to simple central difference methods. A filtering method which is developed uses simple central differencing of arbitrarily high order accuracy, except when a novel local test indicates the development of spurious oscillations. At these points, the full ENO apparatus is used, maintaining the high order of accuracy, but removing spurious oscillations. Numerical results indicate the success of the method. High order of accuracy was obtained in regions of smooth flow without spurious oscillations for a wide range of problems and a significant speed up of generally a factor of almost three over the full ENO method

On the Expressiveness and Complexity of ATL

ATL is a temporal logic geared towards the specification and verification of properties in multi-agents systems. It allows to reason on the existence of strategies for coalitions of agents in order to enforce a given property. In this paper, we first precisely characterize the complexity of ATL model-checking over Alternating Transition Systems and Concurrent Game Structures when the number of agents is not fixed. We prove that it is \Delta^P_2 - and \Delta^P_?_3-complete, depending on the underlying multi-agent model (ATS and CGS resp.). We also consider the same problems for some extensions of ATL. We then consider expressiveness issues. We show how ATS and CGS are related and provide translations between these models w.r.t. alternating bisimulation. We also prove that the standard definition of ATL (built on modalities "Next", "Always" and "Until") cannot express the duals of its modalities: it is necessary to explicitely add the modality "Release".Comment: 25 page

An enhanced concave program relaxation for choice network revenue management

The network choice revenue management problem models customers as choosing from an offer set, and the firm decides the best subset to offer at any given moment to maximize expected revenue. The resulting dynamic program for the firm is intractable and approximated by a deterministic linear program called the CDLP which has an exponential number of columns. However, under the choice-set paradigm when the segment consideration sets overlap, the CDLP is difficult to solve. Column generation has been proposed but finding an entering column has been shown to be NP-hard. In this paper, starting with a concave program formulation called SDCP that is based on segment-level consideration sets, we add a class of constraints called product constraints (σPC), that project onto subsets of intersections. In addition we propose a natural direct tightening of the SDCP called ESDCPκ, and compare the performance of both methods on the benchmark data sets in the literature. In our computational testing on the benchmark data sets in the literature, 2PC achieves the CDLP value at a fraction of the CPU time taken by column generation. For a large network our 2PC procedure runs under 70 seconds to come within 0.02% of the CDLP value, while column generation takes around 1 hour; for an even larger network with 68 legs, column generation does not converge even in 10 hours for most of the scenarios while 2PC runs under 9 minutes. Thus we believe our approach is very promising for quickly approximating CDLP when segment consideration sets overlap and the consideration sets themselves are relatively small

Regularization and Model Selection with Categorial Predictors and Effect Modifiers in Generalized Linear Models

We consider varying-coefficient models with categorial effect modifiers in the framework of generalized linear models. We distinguish between nominal and ordinal effect modifiers, and propose adequate Lasso-type regularization techniques that allow for (1) selection of relevant covariates, and (2) identification of coefficient functions that are actually varying with the level of a potentially effect modifying factor. We investigate the estimators’ large sample properties, and show in simulation studies that the proposed approaches perform very well for finite samples, too. Furthermore, the presented methods are compared with alternative procedures, and applied to real-world medical data

PhysicsGP: A Genetic Programming Approach to Event Selection

We present a novel multivariate classification technique based on Genetic Programming. The technique is distinct from Genetic Algorithms and offers several advantages compared to Neural Networks and Support Vector Machines. The technique optimizes a set of human-readable classifiers with respect to some user-defined performance measure. We calculate the Vapnik-Chervonenkis dimension of this class of learning machines and consider a practical example: the search for the Standard Model Higgs Boson at the LHC. The resulting classifier is very fast to evaluate, human-readable, and easily portable. The software may be downloaded at: http://cern.ch/~cranmer/PhysicsGP.htmlComment: 16 pages 9 figures, 1 table. Submitted to Comput. Phys. Commu

An enhanced concave program relaxation for choice network revenue management

The network choice revenue management problem models customers as choosing from an offer-set, and the firm decides the best subset to offer at any given moment to maximize expected revenue. The resulting dynamic program for the firm is intractable and approximated by a deterministic linear program called the CDLP which has an exponential number of columns. However, under the choice-set paradigm when the segment consideration sets overlap, the CDLP is difficult to solve. Column generation has been proposed but finding an entering column has been shown to be NP-hard. In this paper, starting with a concave program formulation based on segment-level consideration sets called SDCP, we add a class of constraints called product constraints, that project onto subsets of intersections. In addition we propose a natural direct tightening of the SDCP called ?SDCP, and compare the performance of both methods on the benchmark data sets in the literature. Both the product constraints and the ?SDCP method are very simple and easy to implement and are applicable to the case of overlapping segment consideration sets. In our computational testing on the benchmark data sets in the literature, SDCP with product constraints achieves the CDLP value at a fraction of the CPU time taken by column generation and we believe is a very promising approach for quickly approximating CDLP when segment consideration sets overlap and the consideration sets themselves are relatively small.discrete-choice models, network revenue management, optimization