Daniel Sevcovic

Karol Mikula, Daniel Sevcovic, Martin Balazovjech

A new simple Lagrangian method with favorable stability and efficiency properties for computing general plane curve evolutions is presented. The method is based on the flowing finite volume discretization of the intrinsic partial differential equation for updating the position vector of evolving family of plane curves. A curve can be evolved in the normal direction by a combination of fourth order terms related to the intrinsic Laplacian of the curvature, second order terms related to the curvature, first order terms related to anisotropy and by a given external velocity field. The evolution is numerically stabilized by an asymptotically uniform tangential redistribution of grid points yielding the first order intrinsic advective terms in the governing system of equations. By using a semi-implicit in time discretization it can be numerically approximated by a solution to linear penta-diagonal systems of equations (in presence of the fourth order terms) or tri-diagonal systems (in the case of the second order terms). Various numerical experiments of plane curve evolutions, including, in particular, nonlinear, anisotropic and regularized backward curvature flows, surface diffusion and Willmore flows, are presented and discussed.

Michal Benes, Karol Mikula, Tomas Oberhuber et al.

The main goal of this paper is to present results of comparison study for the level set and direct Lagrangian methods for computing evolution of the Willmore flow of embedded planar curves. To perform such a study we construct new numerical approximation schemes for both Lagrangian as well as level set methods based on semi-implicit in time and finite/complementary volume in space discretizations. The Lagrangian scheme is stabilized in tangential direction by the asymptotically uniform grid point redistribution. Both methods are experimentally second order accurate. Moreover, we show precise coincidence of both approaches in case of various elastic curve evolutions provided that solving the linear systems in semi-implicit level set method is done in a precise way, redistancing is performed occasionally and the influence of boundary conditions on the level set function is eliminated.

Daniel Sevcovic, Shigetoshi Yazaki

We study evolution of a closed embedded plane curve with the normal velocity depending on the curvature, the orientation and the position of the curve. We propose a new method of tangential redistribution of points by curvature adjusted control in the tangential motion of evolving curves. The tangential velocity distributes grid points along the curve not only uniform but also lead to a suitable concentration and/or dispersion depending on the curvature. Our study is based on solutions to the governing system of nonlinear parabolic equations for the position vector, tangent angle and curvature of a curve. We furthermore present a semi-implicit numerical discretization scheme based on the flowing finite volume method. Several numerical examples illustrating capability of the new tangential redistribution method are also presented in this paper.

Daniel Sevcovic

The purpose of this paper is to analyze and compute the early exercise boundary for a class of nonlinear Black--Scholes equations with a nonlinear volatility which can be a function of the second derivative of the option price itself. A motivation for studying the nonlinear Black--Scholes equation with a nonlinear volatility arises from option pricing models taking into account e.g. nontrivial transaction costs, investor's preferences, feedback and illiquid markets effects and risk from a volatile (unprotected) portfolio. We present a new method how to transform the free boundary problem for the early exercise boundary position into a solution of a time depending nonlinear parabolic equation defined on a fixed domain. We furthermore propose an iterative numerical scheme that can be used to find an approximation of the free boundary. We present results of numerical approximation of the early exercise boundary for various types of nonlinear Black--Scholes equations and we discuss dependence of the free boundary on various model parameters.

Daniel Sevcovic

The purpose of this survey chapter is to present a transformation technique that can be used in analysis and numerical computation of the early exercise boundary for an American style of vanilla options that can be modelled by class of generalized Black-Scholes equations. We analyze qualitatively and quantitatively the early exercise boundary for a linear as well as a class of nonlinear Black-Scholes equations with a volatility coefficient which can be a nonlinear function of the second derivative of the option price itself. A motivation for studying the nonlinear Black-Scholes equation with a nonlinear volatility arises from option pricing models taking into account e.g. nontrivial transaction costs, investor's preferences, feedback and illiquid markets effects and risk from a volatile (unprotected) portfolio. We present a method how to transform the free boundary problem for the early exercise boundary position into a solution of a time depending nonlinear nonlocal parabolic equation defined on a fixed domain. We furthermore propose an iterative numerical scheme that can be used in order to find an approximation of the free boundary. In the case of a linear Black-Scholes equation we are able to derive a nonlinear integral equation for the position of the free boundary. We present results of numerical approximation of the early exercise boundary for various types of linear and nonlinear Black-Scholes equations and we discuss dependence of the free boundary on model parameters. Finally, we discuss an application of the transformation method for the pricing equation for American type of Asian options.

Daniel Sevcovic, Shigetoshi Yazaki

We analyze a gradient flow of closed planar curves minimizing the anisoperimetric ratio. For such a flow the normal velocity is a function of the anisotropic curvature and it also depends on the total interfacial energy and enclosed area of the curve. In contrast to the gradient flow for the isoperimetric ratio, we show there exist initial curves for which the enclosed area is decreasing with respect to time. We also derive a mixed anisoperimetric inequality for the product of total interfacial energies corresponding to different anisotropy functions. Finally, we present several computational examples illustrating theoretical results.

Beata Stehlikova, Daniel Sevcovic

We analyze analytic approximation formulae for pricing zero-coupon bonds in the case when the short-term interest rate is driven by a one-factor mean-reverting process with a volatility nonlinearly depending on the interest rate itself. We derive the order of accuracy of the analytical approximation due to Choi and Wirjanto. We furthermore give an explicit formula for a higher order approximation and we test both approximations numerically for a class of one-factor interest rate models.

Karol Mikula, Daniel Sevcovic

We discuss the role of tangential stabilization in a curvature driven flow of planar curves. The governing system of nonlinear parabolic equations includes a nontrivial tangential velocity functional yielding a uniform redistribution of grid points along the evolving family of curves preventing numerically computed curves from forming various instabilities.

Karol Mikula, Daniel Sevcovic

In this review paper we present a stable Lagrangian numerical method for computing plane curves evolution driven by the fourth order geometric equation. The numerical scheme and computational examples are presented.