Confinement and Pseudoscalar Glueball Spectrum in the 2 + 1D QCD-Like Theory from the Non-Susy D2 Brane

We study two important properties of 2+1D QCD, namely confinement and Pseudoscalar glueball spectrum, using holographic approach. The confined state of the bounded quark-antiquark pair occurs in the self-coupling dominated nonperturbative regime, where the free gluons form the bound states, known as glueballs. The gauge theory corresponding to low energy decoupled geometry of isotropic non-supersymmetric D2 brane, which is again similar to the 2+1D YM theory, has been taken into account but in this case the coupling constant is found to vary with the energy scale. At BPS limit, this theory reduces to supersymmetric YM theory. We have considered NG action of a test string and calculate the potential of such confined state located on the boundary. The QCD flux tube tension for large quark-antiquark separation is observed to be a monotonically increasing function of running coupling. The mass spectrum of Pseudoscalar glueball is evaluated numerically from the fluctuations of the axion in the gravity theory using WKB approximation. This produces the mass to be related to the string tension and the levels of the first three energy states. The various results that we obtained quite match with those previously studied through the lattice approach.

A lattice approach for option pricing under a regime-switching GARCH-jump model

In this study, we consider option pricing under a Markov regime-switching GARCH-jump (RS-GARCH-jump) model. More specifically, we derive the risk neutral dynamics and propose a lattice algorithm to price European and American options in this framework. We also provide a method of parameter estimation in our RS-GARCH-jump setting using historical data on the underlying time series. To measure the pricing performance of the proposed algorithm, we investigate the convergence of the tree-based results to the true option values and show that this algorithm exhibits good convergence. By comparing the pricing results of RS-GARCH-jump model with regime-switching GARCH (RS-GARCH) model, GARCH-jump model, GARCH model, Black–Scholes (BS) model, and Regime-Switching (RS) model, we show that accommodating jump effect and regime switching substantially changes the option prices. The empirical results also show that the RS-GARCH-jump model performs well in explaining option prices and confirm the importance of allowing for both jump components and regime switching.

How Much do Negative Probabilities Matter in Option Pricing?: A Case of a Lattice-Based Approach for Stochastic Volatility Models

In this paper, we focus on two-factor lattices for general diffusion processes with state-dependent volatilities. Although it is common knowledge that branching probabilities must be between zero and one in a lattice, few methods can guarantee lattice feasibility, referring to the property that all branching probabilities at all nodes in all stages of a lattice are legitimate. Some practitioners have argued that negative probabilities are not necessarily `bad’ and may be further exploited. A theoretical framework of lattice feasibility is developed in this paper, which is used to investigate how negative probabilities may impact option pricing in a lattice approach. It is shown in this paper that lattice feasibility can be achieved by adjusting a lattice’s configuration (e.g., grid sizes and jump patterns). Using this framework as a benchmark, we find that the values of out-of-the-money options are most affected by negative probabilities, followed by in-the-money options and at-the-money options. Since legitimate branching probabilities may not be unique, we use an optimization approach to find branching probabilities that are not only legitimate but also can best fit the probability distribution of the underlying variables. Extensive numerical tests show that this optimized lattice model is robust for financial option valuations.

A Real Options Approach to Design for Quality Standards Considering Life Cycle of a Product

Flexibility is recognized as a valuable parameter for a manufacturing system. When valuing flexibility for quality standards of a production facility, there must be a tool to precisely justify the value delivered by the preferred standards. In this project, we have developed an options model that accounts for the demand dynamics during the product life cycle. We consider a manufacturing facility that employs a specific quality control chart. A second control chart with more strict standards is generated and the effectiveness of two control charts is analyzed with options framework considering the life cycle of the product. The options model is evaluated by lattice approach and the dynamic programming model. The results show that a set of appropriate levels of quality standards when adopted by a manufacturing system can be profitable for the firm.

A Real Options Approach to Design for Quality Standards Considering Life Cycle of a Product

Flexibility is recognized as a valuable parameter for a manufacturing system. When valuing flexibility for quality standards of a production facility, there must be a tool to precisely justify the value delivered by the preferred standards. In this project, we have developed an options model that accounts for the demand dynamics during the product life cycle. We consider a manufacturing facility that employs a specific quality control chart. A second control chart with more strict standards is generated and the effectiveness of two control charts is analyzed with options framework considering the life cycle of the product. The options model is evaluated by lattice approach and the dynamic programming model. The results show that a set of appropriate levels of quality standards when adopted by a manufacturing system can be profitable for the firm.

Spanning With Binary Options: A Vector Lattice Approach

The issue of portfolio insurance is one of the prime concerns of the investors who want to insure their asset at minimum or appropriate cost. Static hedging with binary options is a popular strategy that has been explored in various option models (see e.g. (2; 3; 4; 7)). In this thesis, we propose a static hedging algorithm for discrete time models. Our algorithm is based on a vector lattice technique. In chapter 1, we give the necessary background on the theory of vector lattices and the theory of options. In chapter 2, we reveal the connection of lattice-subspaces with the minimum-cost portfolio insurance strategy. In chapter3, we outline our algorithm and give applications to binomial and trinomial option models. In chapter 4, we perform simulations and analyze the hedging errors of our algorithm for European, Barrier, Geometric Asian, Arithmetic Asian, and Lookback options. The study has revealed that static hedging could be suitable strategy for the European, Barrier, and Geometric Asian options as these options have shown less inclination to the rollover effect.

Spanning With Binary Options: A Vector Lattice Approach

The issue of portfolio insurance is one of the prime concerns of the investors who want to insure their asset at minimum or appropriate cost. Static hedging with binary options is a popular strategy that has been explored in various option models (see e.g. (2; 3; 4; 7)). In this thesis, we propose a static hedging algorithm for discrete time models. Our algorithm is based on a vector lattice technique. In chapter 1, we give the necessary background on the theory of vector lattices and the theory of options. In chapter 2, we reveal the connection of lattice-subspaces with the minimum-cost portfolio insurance strategy. In chapter3, we outline our algorithm and give applications to binomial and trinomial option models. In chapter 4, we perform simulations and analyze the hedging errors of our algorithm for European, Barrier, Geometric Asian, Arithmetic Asian, and Lookback options. The study has revealed that static hedging could be suitable strategy for the European, Barrier, and Geometric Asian options as these options have shown less inclination to the rollover effect.

THE ARITHMETIC PROPERTIES OF LATTICES OF

Only finite groups and classes of finite groups are considered. The lattice approach to the study of formations of groups was first applied by A.N. Skiba in 1986. L.A. Shemetkov and A.N. Skiba established main properties of the lattices of local formations and