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The article is devoted to models of financial markets with stochastic volatility, which is defined by a functional of Ornstein-Uhlenbeck process or Cox-Ingersoll-Ross process. We study the question of exact price of European option. The form of the density function of the random variable, which expresses the average of the volatility over time to maturity is established using Malliavin calculus.The result allows calculate the price of the option with respect to minimum martingale measure when the Wiener process driving the evolution of asset price and the Wiener process, which defines volatility, are uncorrelated.

We consider a discrete-time approximation of paths of an Ornstein--Uhlenbeck process as a mean for estimation of a price of European call option in the model of financial market with stochastic volatility. The Euler--Maruyama approximation scheme is implemented. We determine the estimates for the option price for predetermined sets of parameters. The rate of convergence of the price and an average volatility when discretization intervals tighten are determined. Discretization precision is analyzed for the case where the exact value of the price can be derived., Comment: Published at http://dx.doi.org/10.15559/15-VMSTA43 in the Modern Stochastics: Theory and Applications (https://www.i-journals.org/vtxpp/VMSTA) by VTeX (http://www.vtex.lt/)

We consider the Black--Scholes model of financial market modified to capture the stochastic nature of volatility observed at real financial markets. For volatility driven by the Ornstein--Uhlenbeck process, we establish the existence of equivalent martingale measure in the market model. The option is priced with respect to the minimal martingale measure for the case of uncorrelated processes of volatility and asset price, and an analytic expression for the price of European call option is derived. We use the inverse Fourier transform of a characteristic function and the Gaussian property of the Ornstein--Uhlenbeck process., Comment: Published at http://dx.doi.org/10.15559/15-VMSTA36CNF in the Modern Stochastics: Theory and Applications (https://www.i-journals.org/vtxpp/VMSTA) by VTeX (http://www.vtex.lt/)

Having reviewed the aspects of the linear and synchrosqueezed time-frequency representations (TFRs) needed for their understanding and correct use in Part I of this review, we now consider three more subtle issues that are nonetheless of crucial importance for effective application of these methods. (i) What effect do the window/wavelet parameters have on the resultant TFR, and how can they most appropriately be chosen? (ii) What are the errors inherent in the two reconstruction methods (direct and ridge) and which of them is the better? (iii) What are the advantages and drawbacks associated with synchrosqueezing? To answer these questions, we perform a detailed numerical and theoretical study of the TFRs under consideration. We consider the relevant estimates in the presence of the complications that arise in practical applications including interference between components, amplitude modulation, frequency modulation, and noise. Taken together, the results provide an in-depth understanding of the issues in question., Comment: 39 pages, 28 figures

Time-frequency representations (TFRs) of signals, such as the windowed Fourier transform (WFT), wavelet transform (WT) and their synchrosqueezed variants (SWFT, SWT), provide powerful analysis tools. However, there are many important issues related to the practical use of TFRs that need to be clarified. Here we present a thorough review of these TFRs, summarizing all theoretical, practical and numerical aspects of their use, reconsidering some conventions and introducing new concepts and procedures. The purposes of this work are: (i) to provide a consistent overview of the computation, properties, and use of the (S)WFT/(S)WT methods; (ii) to establish general standards related to their use, both theoretical and practical; and (iii) to provide clean and optimized algorithms and MatLab codes, appropriate for any window or wavelet., Comment: 45 pages, 14 figures

The extraction of oscillatory components and their properties from different time-frequency representations, such as windowed Fourier transform and wavelet transform, is an important topic in signal processing. The first step in this procedure is to find an appropriate ridge curve: a sequence of amplitude peak positions (ridge points), corresponding to the component of interest. This is not a trivial issue, and the optimal method for extraction is still not settled or agreed. We discuss and develop procedures that can be used for this task and compare their performance on both simulated and real data. In particular, we propose a method which, in contrast to many other approaches, is highly adaptive so that it does not need any parameter adjustment for the signal to be analysed. Being based on dynamic path optimization and fixed point iteration, the method is very fast, and its superior accuracy is also demonstrated. In addition, we investigate the advantages and drawbacks that synchrosqueezing offers in relation to curve extraction. The codes used in this work are freely available for download., Comment: 13 pages, 7 figures, plus 4 supplementary figures

Large networks of coupled oscillators appear in many branches of science, so that the kinds of phenomena they exhibit are not only of intrinsic interest but also of very wide importance. In 1975, Kuramoto proposed an analytically tractable model to describe such systems, which has since been successfully applied in many contexts and remains a subject of intensive research. Some related problems, however, remain unclarified for decades, such as the properties of the oscillator glass state discovered by Daido in 1992. Here we present a detailed analysis of a very general form of the Kuramoto model. In particular, we find the conditions when it can exhibit glassy behavior, which represents a kind of synchronous disorder in the present case. Furthermore, we discover a new and intriguing phenomenon that we refer to as {\it superrelaxation} where, for a class of parameter distributions, the oscillators feel no interaction at all during relaxation to incoherence, a phenomenon reminiscent of superfluidity or superconductivity. Our findings offer the possibility of creating glassy states and observing superrelaxation in real systems, thus paving the way to a cascade of applications and further research in the field., Comment: 9 pages, 5 figures

We investigate interacting phase oscillators whose mean field is at a different frequency from the mean or mode of their natural frequencies. The associated asymmetries lead to a macroscopic travelling wave. We show that the mean ensemble frequency of such systems differs from their entrainment frequency. In some scenarios these frequencies take values that, counter-intuitively, lie beyond the limits of the natural frequencies. The results indicate that a clear distinction should be drawn between the two variables describing the macroscopic dynamics of cooperative systems. This has important implications for real systems where a non-trivial distribution of parameters is common., Comment: to be published in Physical Review E

We consider the Kuramoto model of an ensemble of interacting oscillators allowing for an arbitrary distribution of frequencies and coupling strengths. We define a family of traveling wave states as stationary in a rotating frame, and derive general equations for their parameters. We suggest empirical stability conditions which, for the case of incoherence, become exact. In addition to making new theoretical predictions, we show that many earlier results follow naturally from our general framework. The results are applicable in scientific contexts ranging from physics to biology., Comment: 5 pages, 1 figure

We introduce a new adaptive decomposition tool, which we refer to as Nonlinear Mode Decomposition (NMD). It decomposes a given signal into a set of physically meaningful oscillations for any waveform, simultaneously removing the noise. NMD is based on the powerful combination of time-frequency analysis techniques - which together with the adaptive choice of their parameters make it extremely noise-robust - and surrogate data tests, used to identify interdependent oscillations and to distinguish deterministic from random activity. We illustrate the application of NMD to both simulated and real signals, and demonstrate its qualitative and quantitative superiority over the other existing approaches, such as (ensemble) empirical mode decomposition, Karhunen-Loeve expansion and independent component analysis. We point out that NMD is likely to be applicable and useful in many different areas of research, such as geophysics, finance, and the life sciences. The necessary MATLAB codes for running NMD are freely available at http://www.physics.lancs.ac.uk/research/nbmphysics/diats/nmd/., Comment: 38 pages, 13 figures

A microscopic model for thermal excitation of vibrational ground state of a molecule interacting with a condensed medium is developed. The master equation for evolution of occupancies of the vibrational levels is derived. The rate constant limiting the process of molecular thermal excitation is determined analytically. It is shown that while this quantity is independent of temperature at low temperatures coinciding with a rate speed limit for quantum transitions due to uncertainty principle, at high temperatures it rather linearly rises with temperature according to the Einstein's relation for adiabatic transitions.