Study of the risk-adjusted pricing methodology model with methods of Geometrical Analysis

Families of exact solutions are found to a nonlinear modification of the Black-Scholes equation. This risk-adjusted pricing methodology model (RAPM) incorporates both transaction costs and the risk from a volatile portfolio. Using the Lie group analysis we obtain the Lie algebra admitted by the RAPM equation. It gives us the possibility to describe an optimal system of subalgebras and correspondingly the set of invariant solutions to the model. In this way we can describe the complete set of possible reductions of the nonlinear RAPM model. Reductions are given in the form of different second order ordinary differential equations. In all cases we provide solutions to these equations in an exact or parametric form. We discuss the properties of these reductions and the corresponding invariant solutions.Comment: larger version with exact solutions, corrected typos, 13 pages, Symposium on Optimal Stopping in Abo/Turku 200

Projective Differential Geometrical Structure of the Painlevé Equations

AbstractThe necessary and sufficient conditions that an equation of the form y″=f(x, y, y′) can be reduced to one of the Painlevé equations under a general point transformation are obtained. A procedure to check these conditions is found. The theory of invariants plays a leading role in this investigation. The reduction of all six Painlevé equations to the form y″=f(x, y) is obtained. The structure of equivalence classes is investigated for all the Painlevé equations. Following Cartan the space of the normal projective connection which is uniquely associated with any class of equivalent equations is considered. The specific structure of the spaces under investigation allows us to immerse them into RP3. Each immersion generates a triple of two-dimensional manifolds in RP3. The surfaces corresponding to all the Painlevé equations are presented

Casimir force on a piston

We consider a massless scalar field obeying Dirichlet boundary conditions on the walls of a two-dimensional L x b rectangular box, divided by a movable partition (piston) into two compartments of dimensions a x b and (L-a) x b. We compute the Casimir force on the piston in the limit L -> infinity. Regardless of the value of a/b, the piston is attracted to the nearest end of the box. Asymptotic expressions for the Casimir force on the piston are derived for a << b and a >> b.Comment: 10 pages, 1 figure. Final version, accepted for publication in Phys. Rev.

Vacuum local and global electromagnetic self-energies for a point-like and an extended field source

We consider the electric and magnetic energy densities (or equivalently field fluctuations) in the space around a point-like field source in its ground state, after having subtracted the spatially uniform zero-point energy terms, and discuss the problem of their singular behavior at the source's position. We show that the assumption of a point-like source leads, for a simple Hamiltonian model of the interaction of the source with the electromagnetic radiation field, to a divergence of the renormalized electric and magnetic energy density at the position of the source. We analyze in detail the mathematical structure of such singularity in terms of a delta function and its derivatives. We also show that an appropriate consideration of these singular terms solves an apparent inconsistency between the total field energy and the space integral of its density. Thus the finite field energy stored in these singular terms gives an important contribution to the self-energy of the source. We then consider the case of an extended source, smeared out over a finite volume and described by an appropriate form factor. We show that in this case all divergences in local quantities such as the electric and the magnetic energy density, as well as any inconsistency between global and space-integrated local self-energies, disappear.Comment: 8 pages. The final publication is available at link.springer.co

Casimir energy in multiply connected static hyperbolic Universes

We generalize a previously obtained result, for the case of a few other static hyperbolic universes with manifolds of nontrivial topology as spatial sections.Comment: accepted for publicatio

GG-Strands

A $G$-strand is a map $g(t,{s}):\,\mathbb{R}\times\mathbb{R}\to G$ for a Lie group $G$ that follows from Hamilton's principle for a certain class of $G$-invariant Lagrangians. The SO(3)-strand is the $G$-strand version of the rigid body equation and it may be regarded physically as a continuous spin chain. Here, $SO(3)_K$-strand dynamics for ellipsoidal rotations is derived as an Euler-Poincar\'e system for a certain class of variations and recast as a Lie-Poisson system for coadjoint flow with the same Hamiltonian structure as for a perfect complex fluid. For a special Hamiltonian, the $SO(3)_K$-strand is mapped into a completely integrable generalization of the classical chiral model for the SO(3)-strand. Analogous results are obtained for the $Sp(2)$-strand. The $Sp(2)$-strand is the $G$-strand version of the $Sp(2)$ Bloch-Iserles ordinary differential equation, whose solutions exhibit dynamical sorting. Numerical solutions show nonlinear interactions of coherent wave-like solutions in both cases. ${\rm Diff}(\mathbb{R})$-strand equations on the diffeomorphism group $G={\rm Diff}(\mathbb{R})$ are also introduced and shown to admit solutions with singular support (e.g., peakons).Comment: 35 pages, 5 figures, 3rd version. To appear in J Nonlin Sc

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

Effects of Spatial Dispersion on the Casimir Force between Graphene Sheets

The Casimir force between graphene sheets is investigated with emphasis on the effect from spatial dispersion using a combination of factors, such as a nonzero chemical potential and an induced energy gap. We distinguish between two regimes for the interaction - T=0 $K$ and $T\neq 0$ $K$. It is found that the quantum mechanical interaction (T=0 $K$) retains its distance dependence regardless of the inclusion of dispersion. The spatial dispersion from the finite temperature Casimir force is found to contribute for the most part from $n=0$ Matsubara term. These effects become important as graphene is tailored to become a poor conductor by inducing a band gap.Comment: 6 pages, 9 figures. Submitted to EP