Probability Commons^™

The Generation Of Domestic Electricity Load Profiles Through Markov Chain Modelling, Aidan Duffy, Fintan Mcloughlin, Michael Conlon

Conference Papers

Micro-generation technologies such as photovoltaics and micro-wind power are becoming increasing popular among homeowners, mainly a result of policy support mechanisms helping to improve cost competiveness as compared to traditional fossil fuel generation. National government strategies to reduce electricity demand generated from fossil fuels and to meet European Union 20/20 targets is driving this change. However, the real performance of these technologies in a domestic setting is not often known as high time resolution models for domestic electricity load profiles are not readily available. As a result, projections in terms of reducing electricity demand and financial paybacks for these micro-generation …

Probability Models For Blackjack Poker, Charlie H. Cooke

Mathematics & Statistics Faculty Publications

For simplicity in calculation, previous analyses of blackjack poker have employed models which employ sampling with replacement. in order to assess what degree of error this may induce, the purpose here is to calculate results for a typical hand where sampling without replacement is employed. It is seen that significant error can result when long runs are required to complete the hand. The hand examined is itself of particular interest, as regards both its outstanding expectations of high yield and certain implications for pair splitting of two nines against the dealer's seven. Theoretical and experimental methods are used in order …

Random Walks With Elastic And Reflective Lower Boundaries, Lucas Clay Devore

Masters Theses & Specialist Projects

No abstract provided.

Optimal Filtering Of An Advertising Production System With Deteriorating Items, Lakhdar Aggoun, Ali Benmerzouga, Lotfi Tadj

Applications and Applied Mathematics: An International Journal (AAM)

In this paper, we consider an integrated stochastic advertising-production system in the case of a duopoly. Two firms spend certain amounts to advertise some product. The expenses processes evolve according to the jumps of two homogeneous, finite-state Markov chains. We assume that the items in stock may be subject to deterioration and the deterioration parameter is assumed to be random.

On The Mixed Sum Of Doubly Infinite And Finite Independent Random Variables, Mridula Garg

Applications and Applied Mathematics: An International Journal (AAM)

The aim of the present paper is to study the distribution of the mixed sum of two random variables. Here we establish a theorem which gives the probability density function (pdf) of sum of doubly infinite and finite independent random variables. The distribution of the infinite and finite independent random variables is given in the form of corollary. As an application of these results we have obtained a distribution of sum of bilateral exponential variate with triangular, Rayleigh with uniform and Weibull with triangular variate. Some graphs of these distributions have also been given.

The Weak Euler Scheme For Stochastic Delay Equations, Evelyn Buckwar, Rachel Kuske, Salah-Eldin A. Mohammed, Tony Shardlow

Articles and Preprints

We study weak convergence of an Euler scheme for non-linear stochastic delay differential equations (SDDEs) driven by multidimensional Brownian motion. The Euler scheme has weak order of convergence 1, as in the case of stochastic ordinary differential equations (SODEs) (i.e., without delay). The result holds for SDDEs with multiple finite fixed delays in the drift and diffusion terms. Although the set-up is non-anticipating, our approach uses the Malliavin calculus and the anticipating stochastic analysis techniques of Nualart and Pardoux.

The Substitution Theorem For Semilinear Stochastic Partial Differential Equations, Salah-Eldin A. Mohammed, Tusheng Zhang

Articles and Preprints

In this article we establish a substitution theorem for semilinear stochastic evolution equations (see's) depending on the initial condition as an infinite-dimensional parameter. Due to the infinitedimensionality of the initial conditions and of the stochastic dynamics, existing finite-dimensional results do not apply. The substitution theorem is proved using Malliavin calculus techniques together with new estimates on the underlying stochastic semiflow. Applications of the theorem include dynamic characterizations of solutions of stochastic partial differential equations (spde's) with anticipating initial conditions and non-ergodic stationary solutions. In particular, our result gives a new existence theorem for solutions of semilinear Stratonovich spde's with anticipating …

On The Total Duration Of Negative Surplus Of A Risk Process With Two-Step Premium Function, Pavlina Jordanova

Applications and Applied Mathematics: An International Journal (AAM)

We consider a risk reserve process whose premium rate reduces from c_d to c_u when the reserve comes above some critical value v. In the model of Cramer-Lundberg with initial capital u ≥ 0, we obtain the probability that ruin does not occur before the first up-crossing of level v. When u < v, following H. Gerber and E. Shiu (1997), we derive the probability that starting with initial capital u ruin occurs and the severity of ruin is not bigger than v. Further we express the probability of ruin in the two step premium function model - ψ (u,v), by the last two probabilities. Our assumptions imply that the surplus process will go to infinity almost surely. This entails that the process will stay below zero only temporarily. We derive the distribution of the total duration of negative surplus and obtain its Laplace transform and mean value. As a consequence of these results, under certain conditions in the Model of Cramer-Lundberg we obtain the expected value of the severity of ruin. In the end of the paper we give examples with exponential claim sizes.

A Distributed Parabolic Control With Mixed Boundary Conditions, Jose-Luis Menaldi, Domingo Alberto Tarzia

Mathematics Faculty Research Publications

We study the asymptotic behavior of an optimal distributed control problem where the state is given by the heat equation with mixed boundary conditions. The parameter α intervenes in the Robin boundary condition and it represents the heat transfer coefficient on a portion Γ₁ of the boundary of a given regular n-dimensional domain. For each α, the distributed parabolic control problem optimizes the internal energy g. It is proven that the optimal control ĝ_α with optimal state u_ĝαα and optimal adjoint state p_ĝαα are convergent as α → 1 …

First Passage Time Problem For Multivariate Jump-Diffusion Processes: Models, Computation, And Applications In Finance, Di Zhang

Theses and Dissertations (Comprehensive)

The first passage time (FPT) problems are ubiquitous in many applications, from physics to finance. Mathematically, such problems are often reduced to the evaluation of the probability density of the time for a process to cross a certain level, a boundary, or to enter a certain region. While in other areas of applications the FPT problems can often be solved analytically, in finance we usually have to resort to the application of numerical procedures, in particular when we deal with jump-diffusion stochastic processes (JDP). The application of the conventional Monte-Carlo procedure is possible for the solution of the resulting model, …

The Stable Manifold Theorem For Semilinear Stochastic Evolution Equations And Stochastic Partial Differential Equations, Salah-Eldin A. Mohammed, Tusheng Zhang, Huaizhong Zhao

Articles and Preprints

The main objective of this paper is to characterize the pathwise local structure of solutions of semilinear stochastic evolution equations (see’s) and stochastic partial differential equations (spde’s) near stationary solutions. Such characterization is realized through the long-term behavior of the solution field near stationary points. The analysis falls in two parts 1, 2.

In Part 1, we prove general existence and compactness theorems for C^k-cocycles of semilinear see’s and spde’s. Our results cover a large class of semilinear see’s as well as certain semilinear spde’s with Lipschitz and non-Lipschitz terms such as stochastic reaction diffusion equations and the …

Remarks On Risk-Sensitive Control Problems, José Luis Menaldi, Maurice Robin

Mathematics Faculty Research Publications

The main purpose of this paper is to investigate the asymptotic behavior of the discounted risk-sensitive control problem for periodic diffusion processes when the discount factor α goes to zero. If u_α(θ, x) denotes the optimal cost function, being the risk factor, then it is shown that lim_α→0αu_α(θ, x) = ξ(θ) where ξ(θ) is the average on ]0, θ[ of the optimal cost of the (usual) in nite horizon risk-sensitive control problem.

Penalty Approximation And Analytical Characterization Of The Problem Of Super-Replication Under Portfolio Constraints, Alain Bensoussan, Nizar Touzi, José Luis Menaldi

Mathematics Faculty Research Publications

In this paper, we consider the problem of super-replication under portfolio constraints in a Markov framework. More specifically, we assume that the portfolio is restricted to lie in a convex subset, and we show that the super-replication value is the smallest function which lies above the Black-Scholes price function and which is stable for the so-called face lifting operator. A natural approach to this problem is the penalty approximation, which not only provides a constructive smooth approximation, but also a way to proceed analytically.

Discrete-Time Approximations Of Stochastic Delay Equations: The Milstein Scheme, Yaozhong Hu, Salah-Eldin A. Mohammed, Feng Yan

Articles and Preprints

In this paper, we develop a strong Milstein approximation scheme for solving stochastic delay differential equations (SDDE's). The scheme has convergence order 1. In order to establish the scheme, we prove an infinite-dimensional Itô formula for "tame" functions acting on the segment process of the solution of an SDDE. It is interesting to note that the presence of the memory in the SDDE requires the use of the Malliavin calculus and the anticipating stochastic analysis of Nualart and Pardoux. Given the non-anticipating nature of the SDDE, the use of anticipating calculus methods appears to be novel.

Impulse Control Of Stochastic Navier-Stokes Equations, J. L. Menaldi, S. S. Sritharan

Mathematics Faculty Research Publications

In this paper we study stopping time and impulse control problems for stochastic Navier-Stokes equation. Exploiting a local monotonicity property of the nonlinearity, we establish existence and uniqueness of strong solutions in two dimensions which gives a Markov-Feller process. The variational inequality associated with the stopping time problem and the quasi-variational inequality associated with the impulse control problem are resolved in a weak sense, using semigroup approach with a convergence uniform over path.

Stochastic Hybrid Control, A. Bensoussan, J. L. Menaldi

Mathematics Faculty Research Publications

The objective of this paper is to study the stochastic version of a previous paper of the authors, in which hybrid control for deterministic systems was considered. The modelling is quite similar to the deterministic case. We have a system whose state is composed of a continuous part and a discrete part. They are affected by a continuous type control and an impulse control. The dynamics is moreover perturbed by noise, also a continuous and a discrete noise process. The Markovian character of the state process is preserved. We develop the model and show how the dynamic programming approach leads …

Invariant Measure For Diffusions With Jumps, Jose-Luis Menaldi, Maurice Robin

Mathematics Faculty Research Publications

Our purpose is to study an ergodic linear equation associated to diffusion processes with jumps in the whole space. This integro-differential equation plays a fundamental role in ergodic control problems of second order Markov processes. The key result is to prove the existence and uniqueness of an invariant density function for a jump diffusion, whose lower order coefficients are only Borel measurable. Based on this invariant probability, existence and uniqueness (up to an additive constant) of solutions to the ergodic linear equation are established.

Ergodic Control Of Reflected Diffusions With Jumps, Jose-Luis Menaldi, Maurice Robin

Mathematics Faculty Research Publications

No abstract provided.

Lyapunov Exponents Of Linear Stochastic Functional-Differential Equations. Ii. Examples And Case Studies, Salah-Eldin A. Mohammed, Michael K. R. Scheutzow

Articles and Preprints

We give several examples and examine case studies of linear stochastic functional differential equations. The examples fall into two broad classes: regular and singular, according to whether an underlying stochastic semi-flow exists or not. In the singular case, we obtain upper and lower bounds on the maximal exponential growth rate $\overlineλ₁$(σ) of the trajectories expressed in terms of the noise variance σ . Roughly speaking we show that for small σ, $\overlineλ₁$(σ) behaves like -σ² /2, while for large σ, it grows like logσ. In the regular case, it is shown that a discrete Oseledec …

On An Investment-Consumption Model With Transaction Costs, Marianne Akian, José Luis Menaldi, Agnès Sulem

Mathematics Faculty Research Publications

This paper considers the optimal consumption and investment policy for an investor who has available one bank account paying a fixed interest rate and n risky assets whose prices are log-normal diffusions. We suppose that transactions between the assets incur a cost proportional to the size of the transaction. The problem is to maximize the total utility of consumption. Dynamic programming leads to a variational inequality for the value function. Existence and uniqueness of a viscosity solution are proved. The variational inequality is solved by using a numerical algorithm based on policies, iterations, and multigrid methods. Numerical results are displayed …

Population Genetics: Estimation Of Distributions Through Systems Of Non-Linear Differential Equations, Nacer E. Abrouk, Robert J. Lopez

Mathematical Sciences Technical Reports (MSTR)

In stochastic population genetics, the fundamental quantity used for describing the genetic composition of a Mendelian population is the gene frequency. The process of change in the gene frequency is generally modeled as a stochastic process satisfying a stochastic differential equation. The drift and diffusion coefficients in this equation reflect such mechanisms as mutation, selection, and migration that affect the population. Except in very simple cases, it is difficult to determine the probability law of the stochastic process of change in gene frequency. We present a method for obtaining approximations of this process, enabling us to study models more realistic …

Approximation Methods For Singular Diffusions Arising In Genetics, Nacer E. Abrouk

Mathematical Sciences Technical Reports (MSTR)

Stochastic models in population genetics leading to diffusion equations are considered. When the drift and the square of the diffusion coefficients are polynomials, an infinite system of ordinary differential equations for the moments of the diffusion process can be derived using the Martingale property. An example is provided to show how the classical Fokker-Planck Equation approach may not be appropriate for this derivation. A Gauss-Galerkin method for approximating the laws of the diffusion, originally proposed by Dawson (1980), is examined. In the few special cases for which exact solutions are known, comparison shows that the method is accurate and the …

Optimal Control And Differential Games With Measures, E. N. Barron, R. Jensen, J. L. Menaldi

Mathematics Faculty Research Publications

We consider control problems with trajectories which involve ordinary measureable control functions and controls which are measures. The payoff involves a running cost in time and a running cost against the control measures. In the optimal control problem we are trying to minimize this payoff with both controls. In the differential game problem we are trying to minimize the cost with the ordinary controls assuming that the measure controls are chosen to maximize the cost. We will characterize the value functions in both cases using viscosity solution theory by deriving the Bellman and Isaacs equations.

Singular Ergodic Control For Multidimensional Gaussian Processes, J. L. Menaldi, M. Robin, M. I. Taksar

Mathematics Faculty Research Publications

A multidimensional Wiener process is controlled by an additive process of bounded variation. A convex nonnegative function measures the cost associated with the position of the state process, and the cost of controlling is proportional to the displacement induced. We minimize a limiting time-average expected (ergodic) criterion. Under reasonable assumptions, we prove that the optimal discounted cost converges to the optimal ergodic cost. Moreover, under some additional conditions there exists a convex Lipschitz continuous function solution to the corresponding Hamilton-Jacobi-Bellman equation which provides an optimal stationary feedback control.

Shadow Casting Phenomena At Newgrange, Frank Prendergast

Articles

A digital model of the Newgrange passage tomb and surrounding ring of monoliths known as the Great Circle is used to investigate sunrise shadow casting phenomena at the monument. Diurnal variation in shadow directions and lengths are analysed for their potential use in the Bronze Age to indicate the passage of seasonal time. Computer-aided simulations are developed from a photogrammetric survey to accurately show how three of the largest monoliths, located closest to the tomb entrance and archaeologically coded GC1, GC-1 and GC-2, cast their shadows onto the vertical face of the entrance kerbstone, coded K1. The phenomena occur at …

On The Optimal Reward Function Of The Continuous Time Multiarmed Bandit Problem, José Luis Menaldi, Maurice Robin

Mathematics Faculty Research Publications

The optimal reward function associated with the so-called "multiarmed bandit problem" for general Markov-Feller processes is considered. It is shown that this optimal reward function has a simple expression (product form) in terms of individual stopping problems, without any smoothness properties of the optimal reward function neither for the global problem nor for the individual stopping problems. Some results relative to a related problem with switching cost are obtained.

Some Estimates For Finite Difference Approximations, José-Luis Menaldi

Mathematics Faculty Research Publications

Some estimates for the approximation of optimal stochastic control problems by discrete time problems are obtained. In particular an estimate for the solutions of the continuous time versus the discrete time Hamilton-Jacobi-Bellman equations is given. The technique used is more analytic than probabilistic.

On Asymptotic Behavior Of Stopping Time Problems, Jose Luis Menaldi, Maurice Robin

Mathematics Faculty Research Publications

No abstract provided.