Narrow Results

A new approach to the problem of computing risk sensitivities of Bermuda swaptions in a lattice, or PDE, framework is presented. The algorithms developed perform the task much faster and more accurately that the traditional approach in which the Greeks are computed numerically by shocking the appropriate inputs and revaluing the instrument. The time needed to execute the tradition scheme grows linearly with the number of Greeks required, whereas our approach computes any number of Greeks for a Bermuda swaption in nearly constant time. The new method explores symmetries in the structure of Bermuda swaptions to derive recursive relations between different Greeks, and is essentially model-independent. These recursive relations allow us to represent risk sensitivities in a number of ways, in particular as integrals over the "survival" density. The survival density is obtained as a solution to a forward Kolmogorov equation. This representation is the basis for practical applications of our approach.

The aim of this work is to present a modification of the standard binomial method which allows to price American barrier options improving the efficiency of the trinomial methods. Our approach is based on a suitable interpolation of binomial values and allows to price and hedge such options also in the critical case of near barriers. All the different types of single barrier options are considered, in the case of knock-in barriers a new implementation of the binomial method is provided.

In fundamentally discrete approaches to quantum gravity such as loop quantum gravity, spin-foam models, group field theories or Regge calculus observables are functions on discrete geometries. We present a bra-ket formalism of function spaces and discrete calculus on abstract simplicial complexes equipped with geometry and apply it to the mentioned theories of quantum gravity. In particular we focus on the quantum geometric Laplacian and discuss as an example the expectation value of the heat kernel trace from which the spectral dimension follows.