Related papers: Heat kernel methods in finance: the SABR model
The solution to a multivariate linear Stochastic Differential Equation (SDE) with constant initial state is well known to be a Gaussian Markov process, but its covariance kernel involves the solution to an integral equation in the general…
This paper provides explicit pointwise formulas for the heat kernel on compact metric measure spaces that belong to a $(\mathbb{N}\times\mathbb{N})$-parameter family of fractals which are regarded as projective limits of metric measure…
We discuss how the kernel convolution approach can be used to accurately approximate the spatial covariance model on a sphere using spherical distances between points. A detailed derivation of the required formulas is provided. The proposed…
The initial Climate-Extended Risk Model (CERM) addresses the estimate of climate-related financial risk embedded within a bank loan portfolio, through a climatic extension of the Basel II IRB model. It uses a Gaussian copula model…
In this article, we prove a general and rather flexible upper bound for the heat kernel of a weighted heat operator on a closed manifold evolving by an intrinsic geometric flow. The proof is based on logarithmic Sobolev inequalities and…
It is a market practice to express market-implied volatilities in some parametric form. The most popular parametrizations are based on or inspired by an underlying stochastic model, like the Heston model (SVI method) or the SABR model (SABR…
We study the subelliptic heat kernels of the CR three dimensional solvable Lie groups. We first classify all left-invariant sub-Riemannian structures on three dimensional solvable Lie groups and obtain representations of these groups. We…
The main results of the article are short time estimates and asymptotic estimates for the first two order derivatives of the logarithmic heat kernel of a complete Riemannian manifold. We remove all curvature restrictions and also develop…
We use the formalism of Hairer's regularity structures theory \cite{hai-14} to study a heat equation with non-linear perturbation driven by a space-time fractional noise. Different regimes are observed, depending on the global pathwise…
The heat kernels of Laplacians for spin 1/2, 1, 3/2 and 2 fields, and the asymptotic expansion of their traces are studied on manifolds with conical singularities. The exact mode-by-mode analysis is carried out for 2-dimensional domains and…
Variational quantum algorithms are a promising tool for solving partial differential equations. The standard approach for its numerical solution are finite difference schemes, which can be reduced to the linear algebra problem. We consider…
We propose a deterministic numerical method for pricing vanilla options under the SABR stochastic volatility model, based on a finite element discretization of the Kolmogorov pricing equations via non-symmetric Dirichlet forms. Our pricing…
Strong numerical hints exist in favor of a universal blowup scenario in the Sabra shell model, a popular cascade model of 3D turbulence, which features complex velocity variables on a geometric progression of scales $\ell_n \propto \lambda…
This paper studies Brownian motion and heat kernel measure on a class of infinite dimensional Lie groups. We prove a Cameron-Martin type quasi-invariance theorem for the heat kernel measure and give estimates on the $L^p$ norms of the…
In this paper we derive an explicit formula for the heat kernel of the asymmetric quantum Rabi model (AQRM), a symmetry breaking generalization of the quantum Rabi model (QRM). The method described here is an extension of the recently…
Factor modeling is a powerful statistical technique that permits to capture the common dynamics in a large panel of data with a few latent variables, or factors, thus alleviating the curse of dimensionality. Despite its popularity and…
Turbulent flow remains a challenging subject, despite extensive efforts to find analytical descriptions. Modeling small scales of motion is crucial for saving time and resources in numerical simulations, particularly in industrial…
We propose a theoretical framework of multi-way similarity to model real-valued data into hypergraphs for clustering via spectral embedding. For graph cut based spectral clustering, it is common to model real-valued data into graph by…
In this paper, we obtain an explicit formula for the heat kernel on the infinite Cayley graph of the modular group $\operatorname{PSL}_2\mathbb{Z}$, given by the presentation $\langle a,b\mid a^2=1, b^3=1\rangle$. Our approach extends the…
The Zaremba boundary-value problem is a boundary value problem for Laplace-type second-order partial differential operators acting on smooth sections of a vector bundle over a smooth compact Riemannian manifold with smooth boundary but with…