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M. R. Grasselli

Publications and source records attributed to M. R. Grasselli.

10 recordsLinked to original sources
arXiv2010

Dual Connections in Nonparametric Classical Information Geometry

We construct an infinite-dimensional information manifold based on exponential Orlicz spaces without using the notion of exponential convergence. We then show that convex mixtures of probability densities lie on the same connected component of this manifold, and characterize the class of densities for which this mixture can be extended to an open segment containing the extreme points. For this class, we define an infinite-dimensional analogue of the mixture parallel transport and prove that it is dual to the exponential parallel transport with respect to the Fisher information. We also define α-derivatives and prove that they are convex mixtures of the extremal (\pm 1)-derivatives.

math-ph↗
arXiv2005

Nonlinearity, correlation and the valuation of employee stock options

We propose a discrete time algorithm for the valuation of employee stock options based on exponential indifference prices and taking into account both the possibility of partial exercise of a fraction of the options and the use of a correlated traded asset to hedge part of their risk. We determine the optimal exercise policy under this conditions and present numerical results showing how both effects can significantly change the value of the option for an employee, as well as its cost for the issuing firm.

math.ST↗
arXiv2004

Indifference pricing and hedging in stochastic volatility models

We apply the concepts of utility based pricing and hedging of derivatives in stochastic volatility markets and introduce a new class of "reciprocal affine" models for which the indifference price and optimal hedge portfolio for pure volatility claims are efficiently computable. We obtain a general formula for the market price of volatility risk in these models and calculate it explicitly for the case of an exponential utility.

math.PR↗
arXiv2003

Wiener Chaos and the Cox-Ingersoll-Ross model

In this we paper we recast the Cox--Ingersoll--Ross model of interest rates into the chaotic representation recently introduced by Hughston and Rafailidis. Beginning with the ``squared Gaussian representation'' of the CIR model, we find a simple expression for the fundamental random variable X. By use of techniques from the theory of infinite dimensional Gaussian integration, we derive an explicit formula for the n-th term of the Wiener chaos expansion of the CIR model, for n=0,1,2,.... We then derive a new expression for the price of a zero coupon bond which reveals a connection between Gaussian measures and Ricatti differential equations.

math.PR↗
arXiv2002

Duality, monotonicity and the Wigner-Yanase-Dyson metrics

We show that, for each alpha in the interval (-1,1), the only Riemannian metrics on the space of positive definite matrices for which the alpha and -alpha-connections are mutually dual are matrix multiples fo the Wigner-Yanase-Dyson metric. If we further impose that the metric be monotone, then this set is reduced to scalar multiples of the Wigner-Yanase-Dyson metric.

math-ph↗
arXiv2002

A Monte Carlo method for exponential hedging of contingent claims

Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming, which in practise can be difficult to implement. This article presents a Monte Carlo approach to optimal portfolio problems for which the dynamic programming is based on the exponential utility function U(x)=-exp(-x). The algorithm, inspired by the Longstaff-Schwartz approach to pricing American options by Monte Carlo simulation, involves learning the optimal portfolio selection strategy on simulated Monte Carlo data. It shares with the LS framework intuitivity, simplicity and flexibility.

math.PR↗
arXiv2002

Hydrodynamics in an external field

The methods of statistical dynamics are applied to a fluid with 5 conserved fields (the mass, the energy, and the three components of momentum) moving in a given external potential. When the potential is zero, we recover a previously derived system of parabolic differential equations, called "corrections to fluid dynamics".

math-ph↗
arXiv2000

Infinite Dimensional Quantum Information Geometry

We present the construction of an infinite dimensional Banach manifold of quantum mechanical states on a Hilbert space H using different types of small perturbations of a given Hamiltonian. We provide the manifold with a flat connection, called the exponential connection, and comment on the possibility of introducing the dual mixture connection.

math-ph↗
arXiv1999

The quantum information manifold for epsilon-bounded forms

Let H be a self-adjoint operator bounded below by 1, and let V be a small form perturbation such that RVS has finite norm, where R is the resolvent at zero to the power 1/2 +epsilon, and S is the resolvent to the power 1/2-epsilon. Here, epsilon lies between 0 and 1/2. If the Gibbs state defined by H is sufficiently regular, we show that the free energy is an analytic function of V in the sense of Frechet, and that the family of density operators defined in this way is an analytic manifold modelled on a Banach space.

math-ph↗