Utility based pricing of contingent claims

In a discrete setting, we develop a model for pricing a contingent claim. Since the presence of hedging opportunities influences the price of a contingent claim, first we introduce the optimal hedging strategy assuming a contingent claim has been issued: a strategy implemented by investing the budget plus the selling price is optimal if it maximizes the expected utility of the agent's revenue, which is the difference between the outcome of the hedging portfolio and the payoff of the claim. Next, we introduce the `reservation price' as a subjective valuation of a contingent claim. This is defined as the minimum price to be added to the initial budget that makes the issue of the claim more preferable than optimally investing in the available securities. We define the reservation price both for a short position (reservation selling price) and for a long position (reservation buying price) in the contingent claim. When the contingent claim is redundant, both the selling and the buying price collapse in the usual Arrow-Debreu price. We develop a numerical procedure to evaluate the reservation price and two applications are provided. Different utility functions are used and some qualitative properties of the reservation price are shown.Incomplete markets, reservation price, expected utility, optimization

Macroscopic electrostatic potentials and interactions in self-assembled molecular bilayers: the case of Newton black films

We propose a very simple but 'realistic' model of amphiphilic bilayers,simple enough to be able to include a large number of molecules in the sample, but nevertheless detailed enough to include molecular charge distributions, flexible amphiphilic molecules and a reliable model of water. All these parameters are essential in a nanoscopic scale study of intermolecular and long range electrostatic interactions. We also propose a novel, simple and more accurate macroscopic electrostatic field for model bilayers. This model goes beyond the total dipole moment of the sample, which on a time average is zero for this type of symmetrical samples, i. e., it includes higher order moments of this macroscopic electric field. We show that by representing it with a superposition of gaussians it can be 'analytically' integrated, and therefore its calculation is easily implemented in a MD simulation (even in simulations of non-symmetrical bi- or multi-layers). In this paper we test our model by molecular dynamics simulations of Newton black films

A discontinuous Galerkin method for the Vlasov-Poisson system

A discontinuous Galerkin method for approximating the Vlasov-Poisson system of equations describing the time evolution of a collisionless plasma is proposed. The method is mass conservative and, in the case that piecewise constant functions are used as a basis, the method preserves the positivity of the electron distribution function and weakly enforces continuity of the electric field through mesh interfaces and boundary conditions. The performance of the method is investigated by computing several examples and error estimates associated system's approximation are stated. In particular, computed results are benchmarked against established theoretical results for linear advection and the phenomenon of linear Landau damping for both the Maxwell and Lorentz distributions. Moreover, two nonlinear problems are considered: nonlinear Landau damping and a version of the two-stream instability are computed. For the latter, fine scale details of the resulting long-time BGK-like state are presented. Conservation laws are examined and various comparisons to theory are made. The results obtained demonstrate that the discontinuous Galerkin method is a viable option for integrating the Vlasov-Poisson system.Comment: To appear in Journal for Computational Physics, 2011. 63 pages, 86 figure

Linear Theory of Electron-Plasma Waves at Arbitrary Collisionality

The dynamics of electron-plasma waves are described at arbitrary collisionality by considering the full Coulomb collision operator. The description is based on a Hermite-Laguerre decomposition of the velocity dependence of the electron distribution function. The damping rate, frequency, and eigenmode spectrum of electron-plasma waves are found as functions of the collision frequency and wavelength. A comparison is made between the collisionless Landau damping limit, the Lenard-Bernstein and Dougherty collision operators, and the electron-ion collision operator, finding large deviations in the damping rates and eigenmode spectra. A purely damped entropy mode, characteristic of a plasma where pitch-angle scattering effects are dominant with respect to collisionless effects, is shown to emerge numerically, and its dispersion relation is analytically derived. It is shown that such a mode is absent when simplified collision operators are used, and that like-particle collisions strongly influence the damping rate of the entropy mode.Comment: 23 pages, 10 figures, accepted for publication on Journal of Plasma Physic

What exactly is public in a public good game? A lab-in-the field experiment

Are public good games really capturing individuals\u2019 willingness to contribute to real-life public goods? To answer this question, we conducted a lab-in-the-field experiment with communities who own collective goods. In our experiment, subjects voluntarily contribute to a common pool, which can either be subdivided in individual vouchers, as in standard public good games, or used to acquire collective goods, as it happens for real-life public goods. We show that participants\u2019 contributions are larger when the voucher is paid individually, suggesting that individuals\u2019 willingness to contribute to public goods may be overestimated when based on results from laboratory experiments

What exactly is public in a public good game? A lab-in-the field experiment

Are public good games really capturing individuals’ willingness to contribute to real-life public goods? To answer this question, we conducted a lab-in-the-field experiment with communities who own collective goods. In our experiment, subjects voluntarily contribute to a common pool, which can either be subdivided in individual vouchers, as in standard public good games, or used to acquire collective goods, as it happens for real-life public goods. We show that participants’ contributions are larger when the voucher is paid individually, suggesting that individuals’ willingness to contribute to public goods may be overestimated when based on results from laboratory experiments