This paper investigates American puts on a dividend-paying underlying whose volatility is a function of both time and underlying asset price. The asymptotic behaviour of the critical price near expiry is deduced by means of singular perturbation methods. It turns out that if the underlying dividend is greater than the risk-free interest rate, the behaviour of the critical price is parabolic, otherwise an extra logarithmic factor appears, which is similar to the constant volatility case. The results of this paper complement numerical approaches used to calculate the option values and the optimal exercise price at times that are not close to expiry.

The Sherman–Morrison formula is one scheme for computing the approximate inverse preconditioner of a large linear system of equations. However, parallelizing a preconditioning approach is not straightforward as it is necessary to include a sequential process in the matrix factorization. In this paper, we propose a formula that improves the performance of the Sherman–Morrison preconditioner by partially parallelizing the matrix factorization. This study shows that our parallel technique implemented on a PC cluster system of eight processing elements significantly reduces the computational time for the matrix factorization compared with the time taken by a single processor. Our study has also verified that the Sherman–Morrison preconditioner performs better than ILU or MR preconditioners.

We interpret a boundary-value problem arising in a cell growth model as a singular Sturm–Liouville problem that involves a functional differential equation of the pantograph type. We show that the probability density function of the cell growth model corresponds to the first eigenvalue and that there is a family of rapidly decaying eigenfunctions.

We present an application of optimal control theory to a simple SIR disease model of avian influenza transmission dynamics in birds. Basic properties of the model, including the epidemic threshold, are obtained. Optimal control theory is adopted to minimize the density of infected birds subject to an appropriate system of ordinary differential equations. We conclude that an optimally controlled seasonal vaccination strategy saves more birds than when there is a low uniform vaccination rate as in resource-limited places.

In this paper, an efficient computation method is developed for solving a general class of minmax optimal control problems, where the minimum deviation from the violation of the continuous state inequality constraints is maximized. The constraint transcription method is used to construct a smooth approximate function for each of the continuous state inequality constraints. We then obtain an approximate optimal control problem with the integral of the summation of these smooth approximate functions as its cost function. A necessary condition and a sufficient condition are derived showing the relationship between the original problem and the smooth approximate problem. We then construct a violation function from the solution of the smooth approximate optimal control problem and the original continuous state inequality constraints in such a way that the optimal control of the minmax problem is equivalent to the largest root of the violation function, and hence can be solved by the bisection search method. The control parametrization and a time scaling transform are applied to these optimal control problems. We then consider two practical problems: the obstacle avoidance optimal control problem and the abort landing of an aircraft in a windshear downburst.

The superintegrable chiral Potts model has many resemblances to the Ising model, so it is natural to look for algebraic properties similar to those found for the Ising model by Onsager, Kaufman and Yang. The spontaneous magnetization ℳr can be written in terms of a sum over the elements of a matrix Sr. The author conjectured the form of the elements, and this conjecture has been verified by Iorgov et al. The author also conjectured in 2008 that this sum could be expressed as a determinant, and has recently evaluated the determinant to obtain the known result for ℳr. Here we prove that the sum and the determinant are indeed identical expressions. Since the order parameters of the superintegrable chiral Potts model are also those of the more general solvable chiral Potts model, this completes the algebraic calculation of ℳr for the general model.

A general analytic approach is proposed for nonlinear eigenvalue problems governed by nonlinear differential equations with variable coefficients. This approach is based on the homotopy analysis method for strongly nonlinear problems. As an example, a beam with arbitrary variable cross section acted on by a compressive axial load is used to show its validity and effectiveness. This approach provides us with great freedom to transfer the original nonlinear buckling equation with variable coefficients into an infinite number of linear differential equations with constant coefficients that are much easier to solve. More importantly, it provides us with a convenient way to guarantee the convergence of solution series. As an example, the beam displacement and the critical buckling load can be obtained for arbitrary variable cross sections. The influence of nonuniformity of moment of inertia is investigated in detail and the optimal distributions of moment of inertia are studied. It is found that the critical buckling load of a beam with the optimal distribution of moment of inertia can be approximately 21–22% larger than that of a uniform beam with the same average moment of inertia. Mathematically, this approach is rather general and thus can be used to solve many other linear/nonlinear differential equations with variable coefficients.

An important test of the quality of numerical methods developed to track the interface between two fluids is their ability to reproduce test cases or benchmarks. However, benchmark solutions are scarce and virtually nonexistent for complex geometries. We propose a simple method to generate benchmark solutions in the context of the two-layer flow problem, a classical multiphase flow problem. The solutions are obtained by considering the inverse problem of finding the required channel geometry to obtain a prescribed interface profile. This viewpoint shift transforms the problem from that of having to solve a complex differential equation to the much easier one of finding the roots of a quartic polynomial.

In this paper we consider an initial-value problem for the nonlinear fourth-order partial differential equation ut+uux+γuxxxx=0, −∞<x<∞, t>0, where x and t represent dimensionless distance and time respectively and γ is a negative constant. In particular, we consider the case when the initial data has a discontinuous expansive step so that u(x,0)=u0(>0) for x≥0 and u(x,0)=0 for x<0. The method of matched asymptotic expansions is used to obtain the large-time asymptotic structure of the solution to this problem which exhibits the formation of an expansion wave. Whilst most physical applications of this type of equation have γ>0, our calculations show how it is possible to infer the large-time structure of a whole family of solutions for a range of related equations.

In this paper, we consider an insurance company whose surplus (reserve) is modeled by a jump diffusion risk process. The insurance company can invest part of its surplus in n risky assets and purchase proportional reinsurance for claims. Our main goal is to find an optimal investment and proportional reinsurance policy which minimizes the ruin probability. We apply stochastic control theory to solve this problem. We obtain the closed form expression for the minimal ruin probability, optimal investment and proportional reinsurance policy. We find that the minimal ruin probability satisfies the Lundberg equality. We also investigate the effects of the diffusion volatility parameter, the market price of risk and the correlation coefficient on the minimal ruin probability, optimal investment and proportional reinsurance policy through numerical calculations.

The equation modelling the evolution of a foam (a complex porous medium consisting of a set of gas bubbles surrounded by liquid films) is solved numerically. This model is described by the reaction–diffusion differential equation with a free boundary. Two numerical methods, namely the fixed-point and the averaging in time and forward differences in space (the Crank–Nicolson scheme), both in combination with Newton’s method, are proposed for solving the governing equations. The solution of Burgers’ equation is considered as a special case. We present the Crank–Nicolson scheme combined with Newton’s method for the reaction–diffusion differential equation appearing in a foam breaking phenomenon.

The Poiseuille flow of a generalized Maxwell fluid is discussed. The velocity field and shear stress corresponding to the flow in an infinite circular cylinder are obtained by means of the Laplace and Hankel transforms. The motion is caused by the infinite cylinder which is under the action of a longitudinal time-dependent shear stress. Both solutions are obtained in the form of infinite series. Similar solutions for ordinary Maxwell and Newtonian fluids are obtained as limiting cases. Finally, the influence of the material and fractional parameters on the fluid motion is brought to light.

This paper deals with two-species convolution diffusion-competition models of Lotka–Volterra type with delays which describe more accurate information than the Laplacian diffusion-competition models. We first investigate the existence of travelling wave solutions of a class of nonlocal convolution diffusion systems with weak quasimonotonicity or weak exponential quasimonotonicity by a cross-iteration technique and Schauder’s fixed point theorem. When the results are applied to the convolution diffusion-competition models with delays, we establish the existence of travelling wave solutions as well as asymptotic behaviour.

This paper considers an optimal control problem for a class of controlled hybrid dynamical systems (HDSs) with prescribed switchings. By using Ekeland’s variational principle and a matrix cost functional, a minimum principle for HDSs is derived, which provides a necessary condition of the aforementioned problem. The results given in this paper include both pure continuous systems and pure discrete-time systems as special cases.

We consider an iterated form of Lavrentiev regularization, using a null sequence (αk) of positive real numbers to obtain a stable approximate solution for ill-posed nonlinear equations of the form F(x)=y, where F:D(F)⊆X→X is a nonlinear operator and X is a Hilbert space. Recently, Bakushinsky and Smirnova [“Iterative regularization and generalized discrepancy principle for monotone operator equations”, Numer. Funct. Anal. Optim.28 (2007) 13–25] considered an a posteriori strategy to find a stopping index kδ corresponding to inexact data yδ with resulting in the convergence of the method as δ→0. However, they provided no error estimates. We consider an alternate strategy to find a stopping index which not only leads to the convergence of the method, but also provides an order optimal error estimate under a general source condition. Moreover, the condition that we impose on (αk) is weaker than that considered by Bakushinsky and Smirnova.

This paper investigates the linear minimum mean-square error estimation for discrete-time Markovian jump linear systems with delayed measurements. The key technique applied for treating the measurement delay is reorganization innovation analysis, by which the state estimation with delayed measurements is transformed into a standard linear mean-square filter of an associated delay-free system. The optimal filter is derived based on the innovation analysis method together with geometric arguments in an appropriate Hilbert space. The solution is given in terms of two Riccati difference equations. Finally, a simulation example is presented to illustrate the efficiency of the proposed method.

We consider families of general two-point quadrature formulae, using the extension of Montgomery’s identity via Taylor’s formula. The formulae obtained are used to present a number of inequalities for functions whose derivatives are from Lp spaces and Bullen-type inequalities.

We present qualitative and quantitative comparisons of various analytical and numerical approximation methods for calculating a position of the early exercise boundary of American put options paying zero dividends. We analyse the asymptotic behaviour of these methods close to expiration, and introduce a new numerical scheme for computing the early exercise boundary. Our local iterative numerical scheme is based on a solution to a nonlinear integral equation. We compare numerical results obtained by the new method to those of the projected successive over-relaxation method and the analytical approximation formula recently derived by Zhu [‘A new analytical approximation formula for the optimal exercise boundary of American put options’, Int. J. Theor. Appl. Finance9 (2006) 1141–1177].

Criteria for guaranteeing the existence, uniqueness and asymptotic stability (in the sense of Liapunov) of periodic solutions of a forced Liénard-type equation under certain assumptions are presented. These criteria are obtained by application of the Manásevich–Mawhin continuation theorem, Floquet theory, Liapunov stability theory and some analysis techniques. An example is provided to demonstrate the applicability of our results.