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

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

Principal Boundary on Riemannian Manifolds

We consider the classification problem and focus on nonlinear methods for classification on manifolds. For multivariate datasets lying on an embedded nonlinear Riemannian manifold within the higher-dimensional ambient space, we aim to acquire a classification boundary for the classes with labels, using the intrinsic metric on the manifolds. Motivated by finding an optimal boundary between the two classes, we invent a novel approach -- the principal boundary. From the perspective of classification, the principal boundary is defined as an optimal curve that moves in between the principal flows traced out from two classes of data, and at any point on the boundary, it maximizes the margin between the two classes. We estimate the boundary in quality with its direction, supervised by the two principal flows. We show that the principal boundary yields the usual decision boundary found by the support vector machine in the sense that locally, the two boundaries coincide. Some optimality and convergence properties of the random principal boundary and its population counterpart are also shown. We illustrate how to find, use and interpret the principal boundary with an application in real data.Comment: 31 pages,10 figure

The Schrodinger Wave Functional and Vacuum State in Curved Spacetime II. Boundaries and Foliations

In a recent paper, general solutions for the vacuum wave functionals in the Schrodinger picture were given for a variety of classes of curved spacetimes. Here, we describe a number of simple examples which illustrate how the presence of spacetime boundaries influences the vacuum wave functional and how physical quantities are independent of the choice of spacetime foliation used in the Schrodinger approach despite the foliation dependence of the wave functionals themselves.Comment: 26 pages, 4 figures, LATE

Ultraviolet Limit of Open String Theory

We confirm the intuition that a string theory which is perturbatively infrared finite is automatically perturbatively ultraviolet finite. Our derivation based on the asymptotics of the Selberg trace formula for the Greens function on a Riemann surface holds for both open and closed string amplitudes and is independent of modular invariance and supersymmetry. The mass scale for the open strings stretched between Dbranes suggests a natural world-sheet ultraviolet regulator in the string path integral, preserving both T-duality and open-closed string world-sheet duality. Note added (Jan 2005): Comments and related references added.Comment: 22 pages, LaTeX. Note added (Jan 2005): comments and related ref