A restaurant process with cocktail bar and relations to the three-parameter mittag–leffler distribution

In addition to the features of the two-parameter Chinese restaurant process (CRP), the restaurant under consideration has a cocktail bar and hence allows for a wider range of (bar and table) occupancy mechanisms. The model depends on three real parameters, $\alpha$ , $\theta_1$ , and $\theta_2$ , fulfilling certain conditions. Results known for the two-parameter CRP are carried over to this model. We study the number of customers at the cocktail bar, the number of customers at each table, and the number of occupied tables after n customers have entered the restaurant. For $\alpha>0$ the number of occupied tables, properly scaled, is asymptotically three-parameter Mittag–Leffler distributed as n tends to infinity. We provide representations for the two- and three-parameter Mittag–Leffler distribution leading to efficient random number generators for these distributions. The proofs draw heavily from methods known for exchangeable random partitions, martingale methods known for generalized Pólya urns, and results known for the two-parameter CRP.

An elementary derivation of moments of Hawkes processes

Hawkes processes have been widely used in many areas, but their probability properties can be quite difficult. In this paper an elementary approach is presented to obtain moments of Hawkes processes and/or the intensity of a number of marked Hawkes processes, in which the detailed outline is given step by step; it works not only for all Markovian Hawkes processes but also for some non-Markovian Hawkes processes. The approach is simpler and more convenient than usual methods such as the Dynkin formula and martingale methods. The method is applied to one-dimensional Hawkes processes and other related processes such as Cox processes, dynamic contagion processes, inhomogeneous Poisson processes, and non-Markovian cases. Several results are obtained which may be useful in studying Hawkes processes and other counting processes. Our proposed method is an extension of the Dynkin formula, which is simple and easy to use.

Mathematical Modeling of Main Classes of Stochastic Productive Systems

Introduction. The article deals with mathematical models of two main classes of processes in stochastic productive systems. For a multistage system, conditions of belonging to a “just-in-time” class or a class with infinite support of the time distribution function for productive operations are determined. Materials and Methods. Descriptions and investigations of models are carried out by trajectory (martingale) methods. For “just-in-time” systems and multistage stochastic productive systems, terms and methods of random walks in a random environment and birth and death processes are used. The results are formulated as descriptions of intensity characteristics of equalizers of point counting processes. Results. Two theorems are given and proved; they justify the proposed classification of the mathematical models of productive systems. The criteria of the belonging of the stochastic productive system to the class “just-in-time” are given. A theorem on the incompatibility of groups of “just-in-time” systems and systems infinite support of the time distribution for operations is proved. Discussion and Conclusion. The results show the feasibility of analyzing stochastic productive systems by martingale methods. The descriptions of terms of intensities of the equalizers time of productive processes admit generalization.

The Martingale Approach to Optimal Investment

For the special case of optimal consumption/investment problems, there is an alternative to dynamic programming. The alternative is based on market completeness and martingale methods. This approach is sometimes much easier to apply than dynamic programming and we derive the necessary theory in some detail. The theory is then applied to several concrete problems which are solved in detail.

Currency Derivatives

In this chapter we develop a theory for derivatives based on the exchange rate between two (or more) currencies. This is initially done using classical delta hedging methods, but the main part of the theory is developed using martingale methods. We discuss the foreign and the domestic martingale measures and the relations between these measures, and in particular we show that the likelihood ratio between the measures equals the ratio between the foreign and the domestic stochastic discount factors. Option pricing formulas are also derived, and we discuss the Siegel paradox.

Short Rate Models

The simplest Markovian short rate model is analyzed using classical and martingale methods, and the term structure equation for the determination of zero coupon bond prices is derived.