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Register a new userStochastic expansions and Hopf algebras
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We study solutions to nonlinear stochastic differential systems driven by a multi-dimensional Wiener process. A useful algorithm for strongly simulating such stochastic systems is the Castell--Gaines method, which is based on the exponential Lie series. When the diffusion vector fields commute, it has been proved that at low orders this method is more accurate in the mean-square error than corresponding stochastic Taylor methods. However it has also been shown that when the diffusion vector fields do not commute, this is not true for strong order one methods. Here we prove that when there is no drift, and the diffusion vector fields do not commute, the exponential Lie series is usurped by the sinh-log series. In other words, the mean-square error associated with a numerical method based on the sinh-log series, is always smaller than the corresponding stochastic Taylor error, in fact to all orders. Our proof utilizes the underlying Hopf algebra structure of these series, and a two-alphabet associative algebra of shuffle and concatenation operations. We illustrate the benefits of the proposed series in numerical studies.
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In this Note, assuming that the generator is uniform Lipschitz in the unknown variables, we relate the solution of a one dimensional backward stochastic differential equation with the value process of a stochastic differential game. Under a domination condition, a filtration-consistent evaluations is also related to a stochastic differential game. This relation comes out of a min-max representation for uniform Lipschitz functions as affine functions. The extension to reflected backward stochastic differential equations is also included.
We investigate a method of construction of central deformations of associative algebras, which we call centrification. We prove some general results in the case of Hopf algebras and provide several examples.
Density expansions for hypoelliptic diffusions $(X^1,...,X^d)$ are revisited. In particular, we are interested in density expansions of the projection $(X_T^1,...,X_T^l)$, at time $T>0$, with $l leq d$. Global conditions are found which replace the well-known not-in-cutlocus condition known from heat-kernel asymptotics. Our small noise expansion allows for a second order exponential factor. As application, new light is shed on the Takanobu--Watanabe expansion of Brownian motion and Levys stochastic area. Further applications include tail and implied volatility asymptotics in some stochastic volatility models, discussed in a compagnion paper.
It is well known that excessive harvesting or hunting has driven species to extinction both on local and global scales. This leads to one of the fundamental problems of conservation ecology: how should we harvest a population so that economic gain is maximized, while also ensuring that the species is safe from extinction? We study an ecosystem of interacting species that are influenced by random environmental fluctuations. At any point in time, we can either harvest or seed (repopulate) species. Harvesting brings an economic gain while seeding incurs a cost. The problem is to find the optimal harvesting-seeding strategy that maximizes the expected total income from harvesting minus the cost one has to pay for the seeding of various species. We consider what happens when one, or both, of the seeding and harvesting rates are bounded. The focus of this paper is the analysis of these three novel settings: bounded seeding and infinite harvesting, bounded seeding and bounded harvesting, and infinite seeding and bounded harvesting. We prove analytical results and develop numerical approximation methods. By implementing these approximations, we are able to gain qualitative information about how to best harvest and seed species. We are able to show that in the single species setting there are thresholds $0<L_1<L_2<infty$ such that: 1) if the population size is `low, so that it lies in $(0, L_1]$, there is seeding using the maximal seeding rate; 2) if the population size `moderate, so that it lies in $(L_1,L_2)$, there is no harvesting or seeding; 3) if the population size is `high, so that it lies in the interval $[L_2, infty)$, there is harvesting using the maximal harvesting rate. Once we have a system with at least two species, numerical experiments show that constant threshold strategies are not optimal anymore.
The quiver Hopf algebras are classified by means of ramification systems with irreducible representations. This leads to the classification of Nichols algebras over group algebras and pointed Hopf algebras of type one.
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