On the computation of the nth power of a matrix

In this note we discuss the problem of finding the nth power of a matrix which is strongly connected to the study of Markov chains and others mathematical topics. We observe the known fact (but maybe not well known) that the Cayley-Hamilton theorem is of key importance to this goal. We also demonstrate the classical Gauss elimination technique as a tool to compute the minimum polynomial of a matrix without necessarily know the characteristic polynomial

A novel approach to construct numerical methods for stochastic differential equations

In this paper we propose a new numerical method for solving stochastic differential equations (SDEs). As an application of this method we propose an explicit numerical scheme for a super linear SDE for which the usual Euler scheme diverges.Comment: 2 figure

Ergodic Theorems for discrete Markov chains

Let $X_n$ be a discrete time Markov chain with state space $S$ (countably infinite, in general) and initial probability distribution $\mu^{(0)} = (P(X_0=i_1),P(X_0=i_2),\cdots,)$. What is the probability of choosing in random some $k \in \mathbb{N}$ with $k \leq n$ such that $X_k = j$ where $j \in S$? This probability is the average $\frac{1}{n} \sum_{k=1}^n \mu^{(k)}_j$ where $\mu^{(k)}_j = P(X_k = j)$. In this note we will study the limit of this average without assuming that the chain is irreducible, using elementary mathematical tools. Finally, we study the limit of the average $\frac{1}{n} \sum_{k=1}^n g(X_k)$ where $g$ is a given function for a Markov chain not necessarily irreducible

On Neumann superlinear elliptic problems

In this paper we are going to show the existence of a nontrivial solution to the following model problem, \begin{equation*} \left\{\begin{array}{lll} -\Delta (u) = 2uln(1+u^2)+\frac{|u|^2}{1+u^2}2u+u(sin(u)-cos(u)) \mbox{a.e. on } \Omega \frac{\partial u}{\partial \eta} = 0 {a.e. on} \partial \Omega. \end{array} \right. \end{equation*} As one can see the right hand side is superlinear. But we can not use an Ambrosetti-Rabinowitz condition in order to obtain that the corresponding energy functional satisfies (PS) condition. However, it follows that the energy functional satisfies the Cerami (PS) condition

Existence result for a Neumann problem

In this paper we are going to show the existence of a nontrivial solution to the following model problem, $\{\begin{array}{lll} - \Delta (u) = 2uln(1+u^2)+\frac{|u|^2}{1+u^2}2u+usin(u) {a.e. on} \Omega \frac{\partial u}{\partial \eta} = 0 {a.e. on} \partial \Omega. \end{array} \}$ As one can see the right hand side is superlinear. But we can not use an Ambrosetti-Rabinowitz condition in order to obtain that the corresponding energy functional satisfies (PS) condition. However, it follows that the energy functional satisfies the Cerami (PS) condition

Landesman-Laser Conditions and Quasilinear Elliptic Problems

In this paper we consider two elliptic problems. The first one is a Dirichlet problem while the second is Neumann. We extend all the known results concerning Landesman-Laser conditions by using the Mountain-Pass theorem with the Cerami $(PS)$ condition

An explicit and positivity preserving numerical scheme for the mean reverting CEV model

In this paper we propose an explicit and positivity preserving scheme for the mean reverting CEV model which converges in the mean square sense with convergence order $a(a-1/2)$.Comment: 7 page

On explicit numerical schemes for the CIR process

In this paper we generalize an explicit numerical scheme for the CIR process that we have proposed before. The advantage of the new proposed scheme is that preserves positivity and is well posed for a (little bit) broader set of parameters among the positivity preserving schemes. The order of convergence is at least logarithmic in general and for a smaller set of parameters is at least $1/4$. Next we give a different explicit numerical scheme based on exact simulation and we use this idea to approximate the two factor CIR model. Finally, we give a second explicit numerical scheme for the two factor CIR model based on the idea of the second section.Comment: 24 pages, 1 figure

An elementary approach to the option pricing problem

Our goal here is to discuss the pricing problem of European and American options in discrete time using elementary calculus so as to be an easy reference for first year undergraduate students. Using the binomial model we compute the fair price of European and American options. We explain the notion of Arbitrage and the notion of the fair price of an option using common sense. We give a criterion that the holder can use to decide when it is appropriate to exercise the option. We prove the put-call parity formulas for both European and American options and we discuss the relation between American and European options. We give also the bounds for European and American options. We also discuss the portfolio's optimization problem and the fair value in the case where the holder can not produce the opposite portfolio.Comment: 17 page

Construction of positivity preserving numerical schemes for multidimensional stochastic differential equations

In this note we work on the construction of positive preserving numerical schemes for systems of stochastic differential equations. We use the semi discrete idea that we have proposed before proposing now a numerical scheme that preserves positivity on multidimensional stochastic differential equations converging strongly in the mean square sense to the true solution