Forward-Invariance and Wong-Zakai Approximation for Stochastic Moving Boundary Problems

We discuss a class of stochastic second-order PDEs in one space-dimension with an inner boundary moving according to a possibly non-linear, Stefan-type condition. We show that proper separation of phases is attained, i.e., the solution remains negative on one side and positive on the other side of the moving interface, when started with the appropriate initial conditions. To extend results from deterministic settings to the stochastic case, we establish a Wong-Zakai type approximation. After a coordinate transformation the problems are reformulated and analysed in terms of stochastic evolution equations on domains of fractional powers of linear operators.Comment: 46 page

On multicurve models for the term structure

In the context of multi-curve modeling we consider a two-curve setup, with one curve for discounting (OIS swap curve) and one for generating future cash flows (LIBOR for a give tenor). Within this context we present an approach for the clean-valuation pricing of FRAs and CAPs (linear and nonlinear derivatives) with one of the main goals being also that of exhibiting an "adjustment factor" when passing from the one-curve to the two-curve setting. The model itself corresponds to short rate modeling where the short rate and a short rate spread are driven by affine factors; this allows for correlation between short rate and short rate spread as well as to exploit the convenient affine structure methodology. We briefly comment also on the calibration of the model parameters, including the correlation factor.Comment: 16 page

On the Neutralino as Dark Matter Candidate - II. Direct Detection

Evaluations of the event rates relevant to direct search for dark matter neutralino are presented for a wide range of neutralino masses and for various detector materials of preeminent interest. Differential and total rates are appropriately weighted over the local neutralino density expected on theoretical grounds.Comment: (18 pages plain TeX, 24 figures not included, available from the authors) DFTT-38/9

On small-noise equations with degenerate limiting system arising from volatility models

The one-dimensional SDE with non Lipschitz diffusion coefficient $dX_{t} = b(X_{t})dt + \sigma X_{t}^{\gamma} dB_{t}, \ X_{0}=x, \ \gamma<1$ is widely studied in mathematical finance. Several works have proposed asymptotic analysis of densities and implied volatilities in models involving instances of this equation, based on a careful implementation of saddle-point methods and (essentially) the explicit knowledge of Fourier transforms. Recent research on tail asymptotics for heat kernels [J-D. Deuschel, P.~Friz, A.~Jacquier, and S.~Violante. Marginal density expansions for diffusions and stochastic volatility, part II: Applications. 2013, arxiv:1305.6765] suggests to work with the rescaled variable $X^{\varepsilon}:=\varepsilon^{1/(1-\gamma)} X$: while allowing to turn a space asymptotic problem into a small-$\varepsilon$ problem with fixed terminal point, the process $X^{\varepsilon}$ satisfies a SDE in Wentzell--Freidlin form (i.e. with driving noise $\varepsilon dB$). We prove a pathwise large deviation principle for the process $X^{\varepsilon}$ as $\varepsilon \to 0$. As it will become clear, the limiting ODE governing the large deviations admits infinitely many solutions, a non-standard situation in the Wentzell--Freidlin theory. As for applications, the $\varepsilon$-scaling allows to derive exact log-asymptotics for path functionals of the process: while on the one hand the resulting formulae are confirmed by the CIR-CEV benchmarks, on the other hand the large deviation approach (i) applies to equations with a more general drift term and (ii) potentially opens the way to heat kernel analysis for higher-dimensional diffusions involving such an SDE as a component.Comment: 21 pages, 1 figur

Continuous Equilibrium in Affine and Information-Based Capital Asset Pricing Models

We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have exponential utility functions and the individual endowments are spanned by the securities, an equilibrium exists and the agents' optimal trading strategies are constant. Affine processes, and the theory of information-based asset pricing are used to model the endogenous asset price dynamics and the terminal payoff. The derived semi-explicit pricing formulae are applied to numerically analyze the impact of the agents' risk aversion on the implied volatility of simultaneously-traded European-style options.Comment: 24 pages, 4 figure

Dark Matter in Theories of Gauge-Mediated Supersymmetry Breaking

In gauge-mediated theories supersymmetry breaking originates in a strongly interacting sector and is communicated to the ordinary sparticles via SU(3)$\times$SU(2)$\times$U(1) carrying ``messenger'' particles. Stable baryons of the strongly interacting supersymmetry breaking sector naturally weigh $\sim$ 100 TeV and are viable cold dark matter candidates. They interact too weakly to be observed in dark matter detectors. The lightest messenger particle is a viable cold dark matter candidate under particular assumptions. It weighs less than 5 TeV, has zero spin and is easily observable in dark matter detectors.Comment: 10 pages, Late

Light Neutralinos as Dark Matter in the Unconstrained Minimal Supersymmetric Standard Model

The allowed parameter space for the lightest neutralino as the dark matter is explored using the Minimal Supersymmetric Standard Model as the low-energy effective theory without further theoretical constraints such as GUT. Selecting values of the parameters which are in agreement with present experimental limits and applying the additional requirement that the lightest neutralino be in a cosmologically interesting range, we give limits on the neutralino mass and composition. A similar analysis is also performed implementing the grand unification constraints. The elastic scattering cross section of the selected neutralinos on $^{27}$Al and on other materials for dark matter experiments is discussed.Comment: Submitted to Astroparticle Physics, 19 Feb. 96, Latex 23 pages with 24 figures in a gzip compressed file FIGURE.PS.GZ available via anonymous ftp from ftp://iws104.mppmu.mpg.de/pub/gabutt

Analysis of Fourier transform valuation formulas and applications

The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of the asset price process. An interplay between the conditions on the payoff function and the process arises naturally. We also extend these results to the multi-dimensional case, and discuss the calculation of Greeks by Fourier transform methods. As an application, we price options on the minimum of two assets in L\'evy and stochastic volatility models.Comment: 26 pages, 3 figures, to appear in Appl. Math. Financ