COSMO: A Conic Operator Splitting Method for Convex Conic Problems

This paper describes the conic operator splitting method (COSMO) solver, an operator splitting algorithm and associated software package for convex optimisation problems with quadratic objective function and conic constraints. At each step, the algorithm alternates between solving a quasi-definite linear system with a constant coefficient matrix and a projection onto convex sets. The low per-iteration computational cost makes the method particularly efficient for large problems, e.g. semidefinite programs that arise in portfolio optimisation, graph theory, and robust control. Moreover, the solver uses chordal decomposition techniques and a new clique merging algorithm to effectively exploit sparsity in large, structured semidefinite programs. Numerical comparisons with other state-of-the-art solvers for a variety of benchmark problems show the effectiveness of our approach. Our Julia implementation is open source, designed to be extended and customised by the user, and is integrated into the Julia optimisation ecosystem.

GeoChemFoam: Direct Modelling of Multiphase Reactive Transport in Real Pore Geometries with Equilibrium Reactions

GeoChemFoam is an open-source OpenFOAM-based toolbox that includes a range of additional packages that solve various flow processes from multiphase transport with interface transfer, to single-phase flow in multiscale porous media, to reactive transport with mineral dissolution. In this paper, we present a novel multiphase reactive transport solver for simulations on complex pore geometries, including microfluidic devices and micro-CT images, and its implementation in GeoChemFoam. The geochemical model includes bulk and surface equilibrium reactions. Multiphase flow is solved using the Volume-Of-Fluid method, and the transport of species is solved using the continuous species transfer method. The reactive transport equations are solved using a sequential operator splitting method, with the transport step solved using GeoChemFoam, and the reaction step solved using Phreeqc, the US geological survey’s geochemical software. The model and its implementation are validated by comparison with analytical solutions in 1D and 2D geometries. We then simulate multiphase reactive transport in two test pore geometries: a 3D pore cavity and a 3D micro-CT image of Bentheimer sandstone. In each case, we show the pore-scale simulation results can be used to develop upscaled models that are significantly more accurate than standard macro-scale equilibrium models.

Pricing options on a mean-reverting asset by the analytical operator splitting method

In this paper, we propose an operator splitting method to valuate options on the inhomogeneous geometric Brownian motion. By exploiting the approximate dynamical symmetry of the pricing equation, we derive a simple closed-form approximate price formula for a European call option which resembles closely the Black–Scholes price formula for a European vanilla call option. Numerical tests show that the proposed method is able to provide very accurate estimates and tight bounds of the exact option prices. The method is very efficient and robust as well.

Correlated Log-Normal Random Variables under a Multiscale Volatility Model

The study focuses on extending the fast mean-reversion volatility, which was developed by the author in a previous work, to the multiscale volatility model so that it can express a well-separated time scale. The leading-order term and first-order correction terms are analytically computed using the perturbation theory based on the Lie–Trotter operator splitting method. Finally, the study is concluded by deriving the numerical results that further validate the effectiveness of the model.