Pricing and Hedging GLWB in the Heston and in the Black-Scholes with Stochastic Interest Rate Models

Valuing Guaranteed Lifelong Withdrawal Benefit (GLWB) has attracted significant attention from both the academic field and real world financial markets. As remarked by Forsyth and Vetzal the Black and Scholes framework seems to be inappropriate for such long maturity products. They propose to use a regime switching model. Alternatively, we propose here to use a stochastic volatility model (Heston model) and a Black Scholes model with stochastic interest rate (Hull White model). For this purpose we present four numerical methods for pricing GLWB variables annuities: a hybrid tree-finite difference method and a hybrid Monte Carlo method, an ADI finite difference scheme, and a standard Monte Carlo method. These methods are used to determine the no-arbitrage fee for the most popular versions of the GLWB contract, and to calculate the Greeks used in hedging. Both constant withdrawal and optimal withdrawal (including lapsation) strategies are considered. Numerical results are presented which demonstrate the sensitivity of the no-arbitrage fee to economic, contractual and longevity assumptions

Flaw IdeNtification Through The Application Of Loading (FINAL)

The teardown and inspection of aircraft, which have completed a significant period of service, is a central requirement of many Aircraft Structural Integrity Management Plans (ASIMP). The reasons for this include a need to inspect for the potential onset of wide spread fatigue damage and to assess the impact of corrosion and in-service mechanical damage. Furthermore, service life data from fleet aircraft are required to confirm laboratory fatigue test results and substantiate the assumptions made during safe-life calculations or probabilistic risk and reliability studies. A teardown and inspection of the fracture critical F/A-18 wing attachment bulkheads (or centre barrel - CB) has been initiated to achieve these goals for the RAAF's F/A-18 fleet. Use is being made of ex-service CBs supplied from the Canadian Forces and U.S. Navy (USN) CB replacement programs. Investigations suggest that the largest 'likely' cracks in the critical bulkheads will be less than 1 mm deep at the time a CB is replaced. Since the detectable crack depth threshold for current NDI (using high frequency eddy current (HFEC) detection) is 1.0 mm or greater, these cracks may not be found. To significantly improve the probability of detecting cracks that are below the lower threshold of NDI, an increase in their size by accelerated fatigue testing of the CBs has been implemented. Cyclic loads (using the mini-FALSTAFF spectrum) are applied to the wing attachment lugs of ex-service CBs in a test rig to simulate in-flight wing loads. The loading is of sufficient magnitude and duration to ensure that any existing cracks will be grown to a size that ensures their detection under laboratory conditions. Quantitative fractography has been performed on observed cracking to obtain crack growth data and to determine the size, nature and cause of discontinuities that initiate fatigue cracking. This paper will provide a summary of the teardown philosophy, methodology and preliminary results

CIP industrial protocol simulation

Práce se věnuje rodině průmyslových automatizačních protokolů CIP, která spadá do systému SCADA. První část je zaměřena na rozbor protokolu CIP a analýzu dvou protokolů (EtherNet/IP a DeviceNet), které z protokolu CIP vychází. Druhá část se zabývá návrhem scénářů pro simulaci, dále simulací jednosměrné komunikace, obousměrné komunikace za pomocí vyčítání z konzole a obousměrné komunikaci v reálném čase mezi dvěma zařízeními Raspberry Pi 3B+. Ve třetí části je rozebrána realizace samotné simulace, spuštění, funkce předdefinovaných scénářů a grafické rozhraní pro ovládání simulace. Čtvrtá část je zaměřena na analýzu síťové komunikace v situacích, které při simulaci průmyslového protokolu EtherNet/IP nastávají.The thesis is about industrial automatic CIP protocol, which belongs to SCADA systems. The first part is focused on basic principles of CIP protocol and on analysis of two protocols (EtherNET/IP and DeviceNet), which are based on CIP protocol. The second part deals with designing scenarios for a simulation. The simulation of one-way communication, two-way communication with help of reads from the console and two-way real time communication between Raspberries PI 3B+. The third part deals with a realization of the simulation, a start-up and a function of predefined scenarios and graphic interface. The fourth part deals with analysis network communication in situations, which occur during a protocol EtherNet/IP simulation.

Crack growth: Does microstructure play a role?

The experimental data presented in this paper reveals that even if the growth of long cracks in two materials, with different microstructures, have different da/dN versus ΔK curves the corresponding small crack curves can be similar. We also see that long cracks in a large range of steels with different microstructures, chemical compositions, and yield stresses can have similar crack growth rates. The materials science community is challenged to explain these observations. The experimental data also suggests that the threshold term ΔKthr in the Hartman-Schijve variant of the NASGRO crack growth equation appears to have the potential to quantify the way in which small cracks interact with the local microstructure. In this context it is also noted that the variability in the life of operational aircraft is controlled by the probability distribution associated with the size and nature of the material discontinuities in the airframe rather than the probability distribution associated with the scatter in the growth of small cracks with a fixed initial size

Pricing and Hedging GLWB and GMWB in the Heston and in the Black-Scholes with Stochastic Interest Rate Models

La valutazione di polizze assicurative Variable Annuities di tipo GLWB e GMWB ha attratto l'attenzione sia del mondo accademico, sia di quello finanziario. Diversi precedenti lavori di ricerca hanno segnalato che il modello di Black e Scholes risulta inadatto per prodotti con una maturit\ue0 cos\uec lunga. La Tesi propone di utilizzare un modello a volatilit\ue0 stocastica (modello di Heston) e un modello di Black-Scholes con tasso d'interesse stocastico (modello di Hull-White). A tal proposito la Tesi presenta quattro metodi numerici per la valutazione della Variable Annuities di tipo GLWB e GMWB: un metodo ibrido che coniuga metodi ad albero e metodi con equazioni alle derivate parziali, un metodo ibrido che utilizza metodi ad albero e metodi Monte Carlo, un metodo ADI con differenze finite, ed un metodo Monte Carlo Standard. Questi metodi sono utilizzati per determinare il costo in un mercato provo di arbitraggi per le versioni pi\uf9 popolari delle due polizze, e inoltre per calcolare le Greche utilizzate per la copertura. Le strategie del cliente considerate sono sia di tipo costante, sia di tipo dinamico (inclusa la recessione totale). Sono inoltre presentati risultati numerici che dimostrano la sensibilit\ue0 del valore delle polizze alle ipotesi di natura economica, contrattuale e demografica.Evaluation of Variable Annuity insurance policies GLWB and GMWB type has attracted the attention of both the academic world and real world financial markets. Several previous research studies have reported that the Black-Scholes model is unsuitable for products with such a long maturity. The Thesis proposes to use a stochastic volatility model (Heston model) and a Black-Scholes model with stochastic interest rate (Hull-White model). In this regard, the Thesis presents four numerical methods for the evaluation of the GLWB Variable Annuity and GMWB type: a hybrid method that combines tree methods and methods with partial differential equations, a hybrid method using tree methods and Monte Carlo methods, an ADI method with finite differences, and a standard Monte Carlo method. These methods are used to determine the no-arbitrage fee for the most popular versions of the GLWB and GMWB contracts, and to calculate the Greeks used in hedging. Both constant withdrawal and optimal withdrawal (including lapsation) strategies are considered. Numerical results are presented which demonstrate the sensitivity of the no-arbitrage fee to economic, contractual and longevity assumptions

Fractals and the lead crack airframe lifing framework

Abstract The physically short crack regime is primary region of interest in the design and sustainment of highly optimised metallic aircraft. The authors have previously shown that by characterising a fracture surface using fractals concept produces a crack growth model similar to that first proposed by Frost and Dugdale in 1958. This provides a scientific basis to the crack growth model. Further investigations revealed that for short cracks these models predict that crack growth is exponentially related to the applied load history. This observation has led to a practical aircraft lifing approach applicable to the short crack regime known as the lead crack framework. This paper summarises the fractality of metallic fracture surfaces, presents examples of the crack growth behaviour in complex structures, and summarises some useful crack growth tools