Pricing Financial Derivatives using Radial Basis Function generated Finite Differences with Polyharmonic Splines on Smoothly Varying Node Layouts

In this paper, we study the benefits of using polyharmonic splines and node layouts with smoothly varying density for developing robust and efficient radial basis function generated finite difference (RBF-FD) methods for pricing of financial derivatives. We present a significantly improved RBF-FD scheme and successfully apply it to two types of multidimensional partial differential equations in finance: a two-asset European call basket option under the Black--Scholes--Merton model, and a European call option under the Heston model. We also show that the performance of the improved method is equally high when it comes to pricing American options. By studying convergence, computational performance, and conditioning of the discrete systems, we show the superiority of the introduced approaches over previously used versions of the RBF-FD method in financial applications

The conforming virtual element method for polyharmonic and elastodynamics problems: a review

In this paper, we review recent results on the conforming virtual element approximation of polyharmonic and elastodynamics problems. The structure and the content of this review is motivated by three paradigmatic examples of applications: classical and anisotropic Cahn-Hilliard equation and phase field models for brittle fracture, that are briefly discussed in the first part of the paper. We present and discuss the mathematical details of the conforming virtual element approximation of linear polyharmonic problems, the classical Cahn-Hilliard equation and linear elastodynamics problems.Comment: 30 pages, 7 figures. arXiv admin note: text overlap with arXiv:1912.0712

Rot-free mixed finite elements for gradient elasticity at finite strains

Through enrichment of the elastic potential by the second-order gradient of deformation, gradient elasticity formulations are capable of taking nonlocal effects into account. Moreover, geometry-induced singularities, which may appear when using classical elasticity formulations, disappear due to the higher regularity of the solution. In this contribution, a mixed finite element discretization for finite strain gradient elasticity is investigated, in which instead of the displacements, the first-order gradient of the displacements is the solution variable. Thus, the C1 continuity condition of displacement-based finite elements for gradient elasticity is relaxed to C0. Contrary to existing mixed approaches, the proposed approach incorporates a rot-free constraint, through which the displacements are decoupled from the problem. This has the advantage of a reduction of the number of solution variables. Furthermore, the fulfillment of mathematical stability conditions is shown for the corresponding small strain setting. Numerical examples verify convergence in two and three dimensions and reveal a reduced computing cost compared to competitive formulations. Additionally, the gradient elasticity features of avoiding singularities and modeling size effects are demonstrated

Immersed Boundary Smooth Extension: A high-order method for solving PDE on arbitrary smooth domains using Fourier spectral methods

The Immersed Boundary method is a simple, efficient, and robust numerical scheme for solving PDE in general domains, yet it only achieves first-order spatial accuracy near embedded boundaries. In this paper, we introduce a new high-order numerical method which we call the Immersed Boundary Smooth Extension (IBSE) method. The IBSE method achieves high-order accuracy by smoothly extending the unknown solution of the PDE from a given smooth domain to a larger computational domain, enabling the use of simple Cartesian-grid discretizations (e.g. Fourier spectral methods). The method preserves much of the flexibility and robustness of the original IB method. In particular, it requires minimal geometric information to describe the boundary and relies only on convolution with regularized delta-functions to communicate information between the computational grid and the boundary. We present a fast algorithm for solving elliptic equations, which forms the basis for simple, high-order implicit-time methods for parabolic PDE and implicit-explicit methods for related nonlinear PDE. We apply the IBSE method to solve the Poisson, heat, Burgers', and Fitzhugh-Nagumo equations, and demonstrate fourth-order pointwise convergence for Dirichlet problems and third-order pointwise convergence for Neumann problems

Rayleigh-Ritz approximation of the inf-sup constant for the divergence

A numerical scheme for computing approximations to the inf-sup constant of the divergence operator in bounded Lipschitz polytopes in R$^{n}$ is proposed. The method is based on a conforming approximation of the pressure space based on piecewise polynomials of some fixed degree k $\geq \$0. The scheme can be viewed as a Rayleigh–Ritz method and it gives monotonically decreasing approximations of the inf-sup constant under mesh refinement. The new approximation replaces the H⁻¹ norm of a gradient by a discrete H⁻¹ norm which behaves monotonically under mesh refinement. By discretizing the pressure space with piecewise polynomials, upper bounds to the inf-sup constant are obtained. Error estimates are presented that prove convergence rates for the approximation of the inf-sup constant provided it is an isolated eigenvalue of the corresponding non-compact eigenvalue problem; otherwise, plain convergence is achieved. Numerical computations on uniform and adaptive meshes are provided