Information Technology Reference
In-Depth Information
Proposition 9.5.4 Let Assumption 9.5.1 hold , and assume the finite element space
V N is given by (8.19). Then , the matrix A SV
N
×
N
∈ R
is given by
s S q ii (x i )
M q jj (x k )
d
1
2
A SV
:=
i =
k = i
1
s B q ij (x i )
M q ij (x k )
d
B q ij (x j )
d x j q ij (x j )
1
2
d
+
M
i,j
=
1
k/
∈{
i,j
}
j
=
i
s B
M q ii (x k )
s B q ii (x j )
M q ij (x k )
d
d
1
2
1
2
d x i q ii (x i )
d
+
+
k = i
k = j
i
=
1
i,j
=
1
j
=
i
s B μ i (x i )
M μ i (x k )
d
M c k (x k ) ,
i
=
1
k
=
i
k
with weights
q ij (x k )
if k
=
i,
q ij (x k )
:=
d x k q ij (x k )
d
if k
=
i.
Proof The proof follows the lines which led to Proposition 8.4.2. Since the co-
efficients q ij (x) = k q ij (x k ) are not constant, we obtain additional terms due
to integration by parts, i.e. b k
a k
=− b k
q ij (x k )b i k b i k d x k
a k (q ik (x k )b i k ) b i k d x k
=
b k
a k
q ik (x k )b i k b i k d x k b k
d x k q ik (x k )
i k ,i k
d
B q ik (x k )
a k (q ik ) (x k )b i k b i k d x k =−
M
.
i k ,i k
Note that the matrices appearing in the representation of A SV have to be imple-
mented as discussed in Sect. 3.4, since the coefficients are not constant.
κ
Example 9.5.5 Consider the transformed Heston model with operator
A
+ r in
1
1
( 9.21 ) and coefficients q 11 (x 2 )
4 x 2 , q 12 (x 2 )
q 21 (x 2 )
2 βρx 2 , q 22 (x 2 )
β 2 ,
=
=
=
=
1
1
β 2 )( 2 x 1
2
μ 1 (x 2 )
4 βκρ)x 2 +
r , μ 2 (x 2 )
2 ( 2 β 2 κ
=
8 (
1
+
=
α)x 2 +
( 4 αm
) and
1
2 κ(β 2 κ
α)x 2 +
c 2 (x 2 )
=
2 ακm
r (the coefficients depending on x 1 are equal
to 1). By Proposition 9.5.4 , we find
B 2 βρx 2
M 2 βρ
1
8 S 1
1
2 M 1
1
2 B 1
1
2 B 1
M x 2
S β 2
B 2 βρx 2
A κ
=
+
+
4 αm β 2
2 x 2
1
2 B 1
1
2 ( 2 β 2 κ α)x 2 +
M 2 βρ
M 8 ( 1 + 4 βκρ)x 2 + r
B 1
M 1
+
B
M 2 κ(β 2 κ α)x 2 + 2 ακm r .
The above expression can be simplified to
M 1
1
8 S 1
M x 2
A κ
B 1
M 1
=
+
Y 1 +
Y 2 ,
(9.32)
Search WWH ::




Custom Search