Philosophiae Doctor - PhD / Many problems in financial world are being modeled by means of differential equation. These problems are time dependent, highly nonlinear, stochastic and heavily depend on the previous history of time. A variety of financial products exists in the market, such as forwards, futures, swaps and options. Our main focus in this thesis is to use the numerical analysis tools to solve some option pricing problems. Depending upon the inter-relationship of the financial derivatives, the dimension of the associated problem increases drastically and hence conventional methods (for example, the finite difference methods or finite element methods) for solving them do not provide satisfactory results. To resolve this issue, we use a special class of numerical methods, namely, the mesh free methods. These methods are often better suited to cope with changes in the geometry of the domain of interest than classical discretization techniques. In this thesis, we apply these methods to solve problems that price standard and non-standard options. We then extend the proposed approach to solve Heston's volatility model. The methods in each of these cases are analyzed for stability and thorough comparative numerical results are provided.

[pt] Nesta tese estudamos duas classes de problemas. A primeira delas diz respeito a uma equação completamente não-linear que degenera como uma potência do gradiente. A presença desta interface afeta a elipticidade do sistema e produz redução da regularidade. Combinando técnicas da análise harmônica com métodos da teoria da medida, desenvolvemos uma análise tangencial que produz resultados de regularidade para as soluções em espaços de Sobolev. Como consequência, nossos resultados implicam estimativas em espaços de Hölder para o gradiente das soluções, desconhecidas na literatura no caso de termos de fonte não-limitados. A segunda parte trata de um problema de transmissão livre, governado por operadores completamente não-lineares. Neste caso, obtemos regularidade ótima para as soluções, assim como informações sobre a fronteira livre associada. / [en] This thesis focuses on two classes of problems. Firstly, we examine fully nonlinear equation degenerating as a power of the gradient. The interface along which ellipticity collapses introduces substantial difficulties in the analysis and affects the regularity of the solutions. Through methods in harmonic analysis and measure theory we produce a geometric analysis of the problem, which leads to estimates in Sobolev spaces. Furthermore, our findings set an important open problem in the literature, namely: the H lder-continuity for the gradient of solutions in the presence of unbounded source terms. The second part of the thesis focuses on a free transmission problem driven by fully nonlinear operators. On this topic, our results include the optimal regularity of the solutions and an analysis of the associated free boundary.

This thesis treats a range of stochastic methods with various applications, most notably in finance. It is comprised of five articles, and a summary of the key concepts and results these are built on. The first two papers consider a jump-to-default model, which is a model where some quantity, e.g. the price of a financial asset, is represented by a stochastic process which has continuous sample paths except for the possibility of a sudden drop to zero. In Paper I prices of European-type options in this model are studied together with the partial integro-differential equation that characterizes the price. In Paper II the price of a perpetual American put option in the same model is found in terms of explicit formulas. Both papers also study the parameter monotonicity and convexity properties of the option prices. The third and fourth articles both deal with valuation problems in a jump-diffusion model. Paper III concerns the optimal level at which to exercise an American put option with finite time horizon. More specifically, the integral equation that characterizes the optimal boundary is studied. In Paper IV we consider a stochastic game between two players and determine the optimal value and exercise strategy using an iterative technique. Paper V employs a similar iterative method to solve the statistical problem of determining the unknown drift of a stochastic process, where not only running time but also each observation of the process is costly.

Dans cette thèse, nous étudions un principe général de convexification permettant de traiter certainsproblèmes variationnels non convexes sur Rd. Grâce à ce principe nous pouvons mettre en oeuvre lespuissantes techniques de dualité et ramener de tels problèmes à des formulations de type primal–dualdans Rd+1, rendant ainsi efficace la recherche numérique de minima globaux. Une théorie de ladualité et des champs de calibration est reformulée dans le cas de fonctionnelles à croissance linéaire.Sous certaines hypothèses, cela nous permet de généraliser un principe d’exclusion découvert parVisintin dans les années 1990 et de réduire le problème initial à la minimisation d’une fonctionnelleconvexe sur Rd. Ce résultat s’applique notamment à une classe de problèmes à frontière libre oumulti-phasique donnant lieu à des tests numériques très convaincants au vu de la qualité des interfacesobtenues. Ensuite nous appliquons la théorie des calibrations à un problème classique de surfacesminimales avec frontière libre et établissons de nouveaux résultats de comparaison avec sa varianteoù la fonctionnelle des surfaces minimales est remplacée par la variation totale. Nous généralisonsla notion de calibrabilité introduite par Caselles-Chambolle et Al. et construisons explicitementune solution duale pour le problème associé à la seconde fonctionnelle en utilisant un potentiellocalement Lipschitzien lié à la distance au cut-locus. La dernière partie de la thèse est consacrée auxalgorithmes d’optimisation de type primal-dual pour la recherche de points selle, en introduisant denouvelles variantes plus efficaces en précision et temps calcul. Nous avons en particulier introduit unevariante semi-implicite de la méthode d’Arrow-Hurwicz qui permet de réduire le nombre d’itérationsnécessaires pour obtenir une qualité satisfaisante des interfaces. Enfin nous avons traité la nondifférentiabilité structurelle des Lagrangiens utilisés à l’aide d’une méthode géométrique de projectionsur l’épigraphe offrant ainsi une alternative aux méthodes classiques de régularisation. / In this thesis, we study a general principle of convexification to treat certain non convex variationalproblems in Rd. Thanks to this principle we are able to enforce the powerful duality techniques andbring back such problems to primal-dual formulations in Rd+1, thus making efficient the numericalsearch of a global minimizer. A theory of duality and calibration fields is reformulated in the caseof linear-growth functionals. Under suitable assumptions, this allows us to revisit and extend anexclusion principle discovered by Visintin in the 1990s and to reduce the original problem to theminimization of a convex functional in Rd. This result is then applied successfully to a class offree boundary or multiphase problems that we treat numerically obtaining very accurate interfaces.On the other hand we apply the theory of calibrations to a classical problem of minimal surfaceswith free boundary and establish new results related to the comparison with its variant where theminimal surfaces functional is replaced by the total variation. We generalize the notion of calibrabilityintroduced by Caselles-Chambolle and Al. and construct explicitly a dual solution for the problemassociated with the second functional by using a locally Lipschitzian potential related to the distanceto the cut-locus. The last part of the thesis is devoted to primal-dual optimization algorithms forthe search of saddle points, introducing new more efficient variants in precision and computationtime. In particular, we experiment a semi-implicit variant of the Arrow-Hurwicz method whichallows to reduce drastically the number of iterations necessary to obtain a sharp accuracy of theinterfaces. Eventually we tackle the structural non-differentiability of the Lagrangian arising fromour method by means of a geometric projection method on the epigraph, thus offering an alternativeto all classical regularization methods.

L’objectif de cette étude est de simuler l’érosion d’un sol cohésif sous l’effet d’un écoulement incompressible. Le modèle élaboré décrit une vitesse d’érosion interfaciale qui dépend de la contrainte de cisaillement de l’écoulement. La modélisation numérique proposée est une approche eulérienne, où une méthode de pénalisation de domaines est utilisée pour résoudre les équations de Navier-Stokes autour d’un obstacle. L’interface eau/sol est décrite par une fonction Level Set couplée à une loi d’érosion à seuil.L’approximation numérique est basée sur un schéma DDFV (Discrete Duality Finite Volume) autorisant des raffinements locaux sur maillages non-conformes et non-structurés. L’approche par pénalisation a mis en évidence une couche limite d'inconsistance à l'interface fluide/solide lors du calcul de la contrainte de cisaillement. Deux approches sont proposées pour estimer précisément la contrainte de ce problème à frontière libre. La pertinence du modèle à prédire l’érosion interfaciale du sol est confirmée par la présentation de plusieurs résultats de simulation, qui offrent une meilleure évaluation et compréhension des phénomènes d'érosion / This study focuses on the numerical modelling of the interfacial erosion occurring at a cohesive soil undergoing an incompressible flow process. The model assumes that the erosion velocity is driven by a fluid shear stress at the water/soil interface. The numerical modelling is based on the eulerian approach: a penalization procedure is used to compute Navier-Stokes equations around soil obstacle, with a fictitious domain method, in order to avoid body- fitted unstructured meshes. The water/soil interface’s evolution is described by a Level Set function coupled to a threshold erosion law.Because we use adaptive mesh refinement, we develop a Discrete Duality Finite Volume scheme (DDFV), which allows non-conforming and non-structured meshes. The penalization method, used to take into account a free velocity in the soil with non-body-fitted mesh, introduces an inaccurate shear stress at the interface. We propose two approaches to compute accurately the erosion velocity of this free boundary problem. The ability of the model to predict the interfacial erosion of soils is confirmed by presenting several simulations that provide better evaluation and comprehension of erosion phenomena.

<p>This thesis, consisting of six papers and a summary, studies the area of continuous time financial mathematics. A unifying theme for many of the problems studied is the implications of possible mis-specifications of models. Intimately connected with this question is, perhaps surprisingly, convexity properties of option prices. We also study qualitative behavior of different optimal stopping boundaries appearing in option pricing.</p><p>In Paper I a new condition on the contract function of an American option is provided under which the option price increases monotonically in the volatility. It is also shown that American option prices are continuous in the volatility.</p><p>In Paper II an explicit pricing formula for the perpetual American put option in the Constant Elasticity of Variance model is derived. Moreover, different properties of this price are studied.</p><p>Paper III deals with the Russian option with a finite time horizon. It is shown that the value of the Russian option solves a certain free boundary problem. This information is used to analyze the optimal stopping boundary.</p><p>A study of perpetual game options is performed in Paper IV. One of the main results provides a condition under which the value of the option is increasing in the volatility.</p><p>In Paper V options written on several underlying assets are considered. It is shown that, within a large class of models, the only model for the stock prices that assigns convex option prices to all convex contract functions is geometric Brownian motion.</p><p>Finally, in Paper VI it is shown that the optimal stopping boundary for the American put option is convex in the standard Black-Scholes model. </p>

This thesis, consisting of six papers and a summary, studies the area of continuous time financial mathematics. A unifying theme for many of the problems studied is the implications of possible mis-specifications of models. Intimately connected with this question is, perhaps surprisingly, convexity properties of option prices. We also study qualitative behavior of different optimal stopping boundaries appearing in option pricing. In Paper I a new condition on the contract function of an American option is provided under which the option price increases monotonically in the volatility. It is also shown that American option prices are continuous in the volatility. In Paper II an explicit pricing formula for the perpetual American put option in the Constant Elasticity of Variance model is derived. Moreover, different properties of this price are studied. Paper III deals with the Russian option with a finite time horizon. It is shown that the value of the Russian option solves a certain free boundary problem. This information is used to analyze the optimal stopping boundary. A study of perpetual game options is performed in Paper IV. One of the main results provides a condition under which the value of the option is increasing in the volatility. In Paper V options written on several underlying assets are considered. It is shown that, within a large class of models, the only model for the stock prices that assigns convex option prices to all convex contract functions is geometric Brownian motion. Finally, in Paper VI it is shown that the optimal stopping boundary for the American put option is convex in the standard Black-Scholes model.

In this work we address to the problems of the loan origination decision-making systems. In accordance with the basic principles of the loan origination process we considered the main rules of a clients parameters estimation, a change-point problem for the given data and a disorder moment detection problem for the real-time observations. In the first part of the work the main principles of the parameters estimation are given. Also the change-point problem is considered for the given sample in the discrete and continuous time with using the Maximum likelihood method. In the second part of the work the disorder moment detection problem for the real-time observations is considered as a disorder problem for a non-homogeneous Poisson process. The corresponding optimal stopping problem is reduced to the free-boundary problem with a complete analytical solution for the case when the intensity of defaults increases. Thereafter a scheme of the real time detection of a disorder moment is given.

This research investigates wave propagation in an elastic half-space with a quadratic nonlinearity in its stress-strain relationship. Different boundary conditions on the surface are considered that result in both one- and two-dimensional wave propagation problems. The goal of the research is to examine the generation of second-order frequency effects and static effects which may be used to determine the nonlinearity present in the material. This is accomplished by extracting the amplitudes of those effects in the frequency domain and analyzing their dependency on the third-order elastic constants (TOEC). For the one-dimensional problems, both analytical approximate solutions as well as numerical simulations are presented. For the two-dimensional problems, numerical solutions are presented whose dependency on the material's nonlinearity is compared to the one-dimensional problems. The numerical solutions are obtained by first formulating the problem as a hyperbolic system of conservation laws, which is then solved numerically using a semi-discrete central scheme. The numerical method is implemented using the package CentPack. In the one-dimensional cases, it is shown that the analytical and numerical solutions are in good agreement with each other, as well as how different boundary conditions may be used to measure the TOEC. In the two-dimensional cases, it is shown that there exist comparable dependencies of the second-order frequency effects and static effects on the TOEC. Finally, it is analytically and numerically investigated how multiple reflections in a plate can be used to simplify measurements of the material nonlinearity in an experiment.

Cette thèse est divisée en deux parties. Dans la première partie, on considère le système de réaction-diffusion-advection (Pε), qui est un modèle d'haptotaxie, mécanisme lié à la dissémination de tumeurs cancéreuses. Le résultat principal concerne la convergence de la solution du systeme (Pε) vers la solution d'un problème à frontière libre (P0) qui est bien défini. Dans la seconde partie, on considère une classe générale d'équations elliptiques du type Hénon:−∆u = |x|^{α} f(u) dans Ω ⊂ R^N avec α > -2. On examine deux cas classiques : f(u) = e^u, |u|^{p−1} u et deux autres cas : f(u) = u^{p}_{+} puis f(u) nonlinéarité générale. En étudiant les solutions stables en dehors d'un ensemble compact (en particulier, solutions stables et solutions avec indice de Morse fini) avec différentes méthodes, on obtient des résultats de classification. / This thesis is divided into two main parts. In the first part, we consider an example of reaction-diffusion-taxis system (Pε), which is a haptotaxis model - a mechanism about the spread of cancer cells. The main result concerns the convergence of the solution of System (Pε) to the solution of a free boundary problem (P0), where system (P0) is well-posed. In the second part, we consider a general class of Hénon type elliptic equations : −∆u = |x|^{α} f(u) in Ω ⊂ R^Nwith α > −2. We investigate two classical cases f(u) = e^u, |u|^{p−1} u and two others cases f(u) = u^{p}_{+} , f(u) is a general function. By studying the solutions which are stable outside a compact set (in particular, stable solutions and finite Morse index solutions) with different methods, we establish some classification results.