An SFP–FCC method for pricing and hedging early-exercise options under Lévy processes

This paper extends the singular Fourier–Padé (SFP) method proposed by Chan [Singular Fourier–Padé series expansion of European option prices. Quant. Finance, 2018, 18, 1149–1171] for pricing/hedging early-exercise options–Bermudan, American and discrete-monitored barrier options–under a Lévy process. The current SFP method is incorporated with the Filon–Clenshaw–Curtis (FCC) rules invented by Domínguez et al. [Stability and error estimates for Filon–Clenshaw–Curtis rules for highly oscillatory integrals. IMA J. Numer. Anal., 2011, 31, 1253–1280], and we call the new method SFP–FCC. The main purpose of using the SFP–FCC method is to require a small number of terms to yield fast error convergence and to formulate option pricing and option Greek curves rather than individual prices/Greek values. We also numerically show that the SFP–FCC method can retain a global spectral convergence rate in option pricing and hedging when the risk-free probability density function is piecewise smooth. Moreover, the computational complexity of the method is O((L−1)(N+1)( Ñ log Ñ)) with N, a (small) number of complex Fourier series terms, Ñ, a number of Chebyshev series terms and L, the number of early-exercise/monitoring dates. Finally, we compare the accuracy and computational time of our method with those of existing techniques in numerical experiments

Singular Fourier-Padé Series Expansion of European Option Prices

We apply a new numerical method, the singular Fourier-Pad ́e (SFP) method invented by Driscoll and Fornberg (2001, 2011), to price European-type options in L ́evy and affine processes. The motivation behind this application is to reduce the inefficiency of current Fourier techniques when they are used to approximate piecewise continuous (non-smooth) probability density functions. When techniques such as fast Fourier transforms and Fourier series are applied to price and hedge options with non-smooth prob- ability density functions, they cause the Gibbs phenomenon; accordingly, the techniques converge slowly for density functions with jumps in value or derivatives. This seriously adversely affects the efficiency and accuracy of these techniques. In this paper, we derive pricing formulae and their option Greeks using the SFP method to resolve the Gibbs phenomenon and restore the global spectral convergence rate. More- over, we show that our method requires a small number of terms to yield fast error convergence, and it is able to accurately price any European-type option deep in/out of the money and with very long/short maturities. Furthermore, we conduct an error-bound analysis of the SFP method in option pricing. This new method performs favourably in numerical experiments compared with existing techniques

Isospectrality in Chaotic Billiards

We consider a modification of isospectral cavities whereby the classical dynamics changes from pseudointegrable to chaotic. We construct an example where we can prove that isospectrality is retained. We then demonstrate this explicitly in microwave resonators.Comment: 5 pages, 7 figure

On surface states and star-subalgebras in string field theory

We elaborate on the relations between surface states and squeezed states. First, we investigate two different criteria for determining whether a matter sector squeezed state is also a surface state and show that the two criteria are equivalent. Then, we derive similar criteria for the ghost sector. Next, we refine the criterion for determining whether a surface state is in H_{\kappa^2}, the subalgebra of squeezed states obeying [S,K_1^2]=0. This enables us to find all the surface states of the H_{\kappa^2} subalgebra, and show that it consists only of wedge states and (hybrid) butterflies. Finally, we investigate generalizations of this criterion and find an infinite family of surface states subalgebras, whose surfaces are described using a "generalized Schwarz-Christoffel" mapping.Comment: 38 pages, 6 figures, JHEP style; typos corrected, ref. adde

CDMS, Supersymmetry and Extra Dimensions

The CDMS experiment aims to directly detect massive, cold dark matter particles originating from the Milky Way halo. Charge and lattice excitations are detected after a particle scatters in a Ge or Si crystal kept at ~30 mK, allowing to separate nuclear recoils from the dominating electromagnetic background. The operation of 12 detectors in the Soudan mine for 75 live days in 2004 delivered no evidence for a signal, yielding stringent limits on dark matter candidates from supersymmetry and universal extra dimensions. Thirty Ge and Si detectors are presently installed in the Soudan cryostat, and operating at base temperature. The run scheduled to start in 2006 is expected to yield a one order of magnitude increase in dark matter sensitivity.Comment: To be published in the proceedings of the 7th UCLA symposium on sources and detection of dark matter and dark energy in the universe, Marina del Rey, Feb 22-24, 200