New analytic approach to address Put - Call parity violation due to discrete dividends

The issue of developing simple Black-Scholes type approximations for pricing European options with large discrete dividends was popular since early 2000's with a few different approaches reported during the last 10 years. Moreover, it has been claimed that at least some of the resulting expressions represent high-quality approximations which closely match results obtained by the use of numerics. In this paper we review, on the one hand, these previously suggested Black-Scholes type approximations and, on the other hand, different versions of the corresponding Crank-Nicolson numerical schemes with a primary focus on their boundary condition variations. Unexpectedly we often observe substantial deviations between the analytical and numerical results which may be especially pronounced for European Puts. Moreover, our analysis demonstrates that any Black-Scholes type approximation which adjusts Put parameters identically to Call parameters has an inherent problem of failing to detect a little known Put-Call Parity violation phenomenon. To address this issue we derive a new analytic approximation which is in a better agreement with the corresponding numerical results in comparison with any of the previously known analytic approaches for European Calls and Puts with large discrete dividends

Homogeneous components in the moduli space of sheaves and Virasoro characters

The moduli space $\mathcal M(r,n)$ of framed torsion free sheaves on the projective plane with rank $r$ and second Chern class equal to $n$ has the natural action of the $(r+2)$-dimensional torus. In this paper, we look at the fixed point set of different one-dimensional subtori in this torus. We prove that in the homogeneous case the generating series of the numbers of the irreducible components has a beautiful decomposition into an infinite product. In the case of odd $r$ these infinite products coincide with certain Virasoro characters. We also propose a conjecture in a general quasihomogeneous case.Comment: Published version, 19 page

Towards a description of the double ramification hierarchy for Witten's rr-spin class

The double ramification hierarchy is a new integrable hierarchy of hamiltonian PDEs introduced recently by the first author. It is associated to an arbitrary given cohomological field theory. In this paper we study the double ramification hierarchy associated to the cohomological field theory formed by Witten's $r$-spin classes. Using the formula for the product of the top Chern class of the Hodge bundle with Witten's class, found by the second author, we present an effective method for a computation of the double ramification hierarchy. We do explicit computations for $r=3,4,5$ and prove that the double ramification hierarchy is Miura equivalent to the corresponding Dubrovin--Zhang hierarchy. As an application, this result together with a recent work of the first author with Paolo Rossi gives a quantization of the $r$-th Gelfand--Dickey hierarchy for $r=3,4,5$.Comment: v3: 26 pages (accepted in Journal de Math\'ematiques Pures et Appliqu\'ees