arXiv subjects

Hao Xing

Publications and source records attributed to Hao Xing.

45 records · Page 3Linked to original sources

arXiv2012

Abstract, Classic, and Explicit Turnpikes

Portfolio turnpikes state that, as the investment horizon increases, optimal portfolios for generic utilities converge to those of isoelastic utilities. This paper proves three kinds of turnpikes. In a general semimartingale setting, the abstract turnpike states that optimal final payoffs and portfolios converge under their myopic probabilities. In diffusion models with several assets and a single state variable, the classic turnpike demonstrates that optimal portfolios converge under the physical probability; meanwhile the explicit turnpike identifies the limit of finite-horizon optimal portfolios as a long-run myopic portfolio defined in terms of the solution of an ergodic HJB equation.

q-fin.PM↗

arXiv2011

Valuation equations for stochastic volatility models

We analyze the valuation partial differential equation for European contingent claims in a general framework of stochastic volatility models where the diffusion coefficients may grow faster than linearly and degenerate on the boundaries of the state space. We allow for various types of model behavior: the volatility process in our model can potentially reach zero and either stay there or instantaneously reflect, and the asset-price process may be a strict local martingale. Our main result is a necessary and sufficient condition on the uniqueness of classical solutions to the valuation equation: the value function is the unique nonnegative classical solution to the valuation equation among functions with at most linear growth if and only if the asset-price is a martingale.

math.PR↗

arXiv2011

On backward stochastic differential equations and strict local martingales

We study a backward stochastic differential equation whose terminal condition is an integrable function of a local martingale and generator has bounded growth in $z$. When the local martingale is a strict local martingale, the BSDE admits at least two different solutions. Other than a solution whose first component is of class D, there exists another solution whose first component is not of class D and strictly dominates the class D solution. Both solutions are $\mathbb{L}^p$ integrable for any $0<p<1$. These two different BSDE solutions generate different viscosity solutions to the associated quasi-linear partial differential equation. On the contrary, when a Lyapunov function exists, the local martingale is a martingale and the quasi-linear equation admits a unique viscosity solution of at most linear growth.

math.PR↗

arXiv2009

Strict Local Martingale Deflators and Pricing American Call-Type Options

We solve the problem of pricing and optimal exercise of American call-type options in markets which do not necessarily admit an equivalent local martingale measure. This resolves an open question proposed by Fernholz and Karatzas [Stochastic Portfolio Theory: A Survey, Handbook of Numerical Analysis, 15:89-168, 2009].

q-fin.PR↗

arXiv2009

On the uniqueness of classical solutions of Cauchy problems

Given that the terminal condition is of at most linear growth, it is well known that a Cauchy problem admits a unique classical solution when the coefficient multiplying the second derivative (i.e., the volatility) is also a function of at most linear growth. In this note, we give a condition on the volatility that is necessary and sufficient for a Cauchy problem to admit a unique solution.

math.AP↗

arXiv2008

Pricing American Options for Jump Diffusions by Iterating Optimal Stopping Problems for Diffusions

We approximate the price of the American put for jump diffusions by a sequence of functions, which are computed iteratively. This sequence converges to the price function uniformly and exponentially fast. Each element of the approximating sequence solves an optimal stopping problem for geometric Brownian motion, and can be numerically computed using the classical finite difference methods. We prove the convergence of this numerical scheme and present examples to illustrate its performance.

cs.CE↗

arXiv2008

Analysis of the optimal exercise boundary of American options for jump diffusions

In this paper we show that the optimal exercise boundary / free boundary of the American put option pricing problem for jump diffusions is continuously differentiable (except at the maturity). This differentiability result has been established by Yang et al. (European Journal of Applied Mathematics, 17(1):95-127, 2006) in the case where the condition $r\geq q+ λ\int_{\R_+} (e^z-1) ν(dz)$ is satisfied. We extend the result to the case where the condition fails using a unified approach that treats both cases simultaneously. We also show that the boundary is infinitely differentiable under a regularity assumption on the jump distribution.

math.PR↗

arXiv2008

Pricing Asian Options for Jump Diffusions

We construct a sequence of functions that uniformly converge (on compact sets) to the price of Asian option, which is written on a stock whose dynamics follows a jump diffusion, exponentially fast. Each of the element in this sequence solves a parabolic partial differen- tial equation (not an integro-differential equation). As a result we obtain a fast numerical approximation scheme whose accuracy versus speed characteristics can be controlled. We analyze the performance of our numerical algorithm on several examples.

cs.CE↗

arXiv2006

On effective F-theory action in type IIA compactifications

Diaconescu, Moore and Witten proved that the partition function of type IIA string theory coincides (to the extent checked) with the partition function of M-theory. One of us (Kriz) and Sati proposed in a previous paper a refinement of the IIA partition function using elliptic cohomology and conjectured that it coincides with a partition function coming from F-theory. In this paper, we define the geometric term of the F-theoretical effective action on type IIA compactifications. In the special case when the first Pontrjagin class of spacetime vanishes, we also prove a version of the Kriz-Sati conjecture by extending the arguments of Diaconescu-Moore-Witten. We also briefly discuss why even this special case contains interesting examples.

hep-th↗