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Continuous-Time Portfolio Optimization under Partial Information and Convex Constraints: Deriving Explicit Results (2017)

Christian Vonwirth

In this thesis we explicitly solve several portfolio optimization problems in a very realistic setting. The fundamental assumptions on the market setting are motivated by practical experience and the resulting optimal strategies are challenged in numerical simulations. We consider an investor who wants to maximize expected utility of terminal wealth by trading in a high-dimensional financial market with one riskless asset and several stocks. The stock returns are driven by a Brownian motion and their drift is modelled by a Gaussian random variable. We consider a partial information setting, where the drift is unknown to the investor and has to be estimated from the observable stock prices in addition to some analyst’s opinion as proposed in [CLMZ06]. The best estimate given these observations is the well known Kalman-Bucy-Filter. We then consider an innovations process to transform the partial information setting into a market with complete information and an observable Gaussian drift process. The investor is restricted to portfolio strategies satisfying several convex constraints. These constraints can be due to legal restrictions, due to fund design or due to client's specifications. We cover in particular no-short-selling and no-borrowing constraints. One popular approach to constrained portfolio optimization is the convex duality approach of Cvitanic and Karatzas. In [CK92] they introduce auxiliary stock markets with shifted market parameters and obtain a dual problem to the original portfolio optimization problem that can be better solvable than the primal problem. Hence we consider this duality approach and using stochastic control methods we first solve the dual problems in the cases of logarithmic and power utility. Here we apply a reverse separation approach in order to obtain areas where the corresponding Hamilton-Jacobi-Bellman differential equation can be solved. It turns out that these areas have a straightforward interpretation in terms of the resulting portfolio strategy. The areas differ between active and passive stocks, where active stocks are invested in, while passive stocks are not. Afterwards we solve the auxiliary market given the optimal dual processes in a more general setting, allowing for various market settings and various dual processes. We obtain explicit analytical formulas for the optimal portfolio policies and provide an algorithm that determines the correct formula for the optimal strategy in any case. We also show optimality of our resulting portfolio strategies in different verification theorems. Subsequently we challenge our theoretical results in a historical and an artificial simulation that are even closer to the real world market than the setting we used to derive our theoretical results. However, we still obtain compelling results indicating that our optimal strategies can outperform any benchmark in a real market in general.

The Split tree for option pricing (2017)

Merima Nurkanović

In this dissertation convergence of binomial trees for option pricing is investigated. The focus is on American and European put and call options. For that purpose variations of the binomial tree model are reviewed. In the first part of the thesis we investigated the convergence behavior of the already known trees from the literature (CRR, RB, Tian and CP) for the European options. The CRR and the RB tree suffer from irregular convergence, so our first aim is to find a way to get the smooth convergence. We first show what causes these oscillations. That will also help us to improve the rate of convergence. As a result we introduce the Tian and the CP tree and we proved that the order of convergence for these trees is \(O \left(\frac{1}{n} \right)\). Afterwards we introduce the Split tree and explain its properties. We prove the convergence of it and we found an explicit first order error formula. In our setting, the splitting time \(t_{k} = k\Delta t\) is not fixed, i.e. it can be any time between 0 and the maturity time \(T\). This is the main difference compared to the model from the literature. Namely, we show that the good properties of the CRR tree when \(S_{0} = K\) can be preserved even without this condition (which is mainly the case). We achieved the convergence of \(O \left(n^{-\frac{3}{2}} \right)\) and we typically get better results if we split our tree later.

Mathematical modelling of interacting fibre structures and non-woven materials (2017)

Christian Nessler

Non–woven materials consist of many thousands of fibres laid down on a conveyor belt under the influence of a turbulent air stream. To improve industrial processes for the production of non–woven materials, we develop and explore novel mathematical fibre and material models. In Part I of this thesis we improve existing mathematical models describing the fibres on the belt in the meltspinning process. In contrast to existing models, we include the fibre–fibre interaction caused by the fibres’ thickness which prevents the intersection of the fibres and, hence, results in a more accurate mathematical description. We start from a microscopic characterisation, where each fibre is described by a stochastic functional differential equation and include the interaction along the whole fibre path, which is described by a delay term. As many fibres are required for the production of a non–woven material, we consider the corresponding mean–field equation, which describes the evolution of the fibre distribution with respect to fibre position and orientation. To analyse the particular case of large turbulences in the air stream, we develop the diffusion approximation which yields a distribution describing the fibre position. Considering the convergence to equilibrium on an analytical level, as well as performing numerical experiments, gives an insight into the influence of the novel interaction term in the equations. In Part II of this thesis we model the industrial airlay process, which is a production method whereby many short fibres build a three–dimensional non–woven material. We focus on the development of a material model based on original fibre properties, machine data and micro computer tomography. A possible linking of these models to other simulation tools, for example virtual tensile tests, is discussed. The models and methods presented in this thesis promise to further the field in mathematical modelling and computational simulation of non–woven materials.

Product Pricing with Additive Influences - Algorithms and Complexity Results for Pricing in Social Networks (2017)

Florian David Schwahn

We introduce and investigate a product pricing model in social networks where the value a possible buyer assigns to a product is influenced by the previous buyers. The selling proceeds in discrete, synchronous rounds for some set price and the individual values are additively altered. Whereas computing the revenue for a given price can be done in polynomial time, we show that the basic problem PPAI, i.e., is there a price generating a requested revenue, is weakly NP-complete. With algorithm Frag we provide a pseudo-polynomial time algorithm checking the range of prices in intervals of common buying behavior we call fragments. In some special cases, e.g., solely positive influences, graphs with bounded in-degree, or graphs with bounded path length, the amount of fragments is polynomial. Since the run-time of Frag is polynomial in the amount of fragments, the algorithm itself is polynomial for these special cases. For graphs with positive influence we show that every buyer does also buy for lower prices, a property that is not inherent for arbitrary graphs. Algorithm FixHighest improves the run-time on these graphs by using the above property. Furthermore, we introduce variations on this basic model. The version of delaying the propagation of influences and the awareness of the product can be implemented in our basic model by substituting nodes and arcs with simple gadgets. In the chapter on Dynamic Product Pricing we allow price changes, thereby raising the complexity even for graphs with solely positive or negative influences. Concerning Perishable Product Pricing, i.e., the selling of products that are usable for some time and can be rebought afterward, the principal problem is computing the revenue that a given price can generate in some time horizon. In general, the problem is #P-hard and algorithm Break runs in pseudo-polynomial time. For polynomially computable revenue, we investigate once more the complexity to find the best price. We conclude the thesis with short results in topics of Cooperative Pricing, Initial Value as Parameter, Two Product Pricing, and Bounded Additive Influence.

An Integer Network Flow Problem with Bridge Capacities (2017)

Horst W. Hamacher Anika Kinscherff

In this paper a modified version of dynamic network ows is discussed. Whereas dynamic network flows are widely analyzed already, we consider a dynamic flow problem with aggregate arc capacities called Bridge Problem which was introduced by Melkonian [Mel07]. We extend his research to integer flows and show that this problem is strongly NP-hard. For practical relevance we also introduce and analyze the hybrid bridge problem, i.e. with underlying networks whose arc capacity can limit aggregate flow (bridge problem) or the flow entering an arc at each time (general dynamic flow). For this kind of problem we present efficient procedures for special cases that run in polynomial time. Moreover, we present a heuristic for general hybrid graphs with restriction on the number of bridge arcs. Computational experiments show that the heuristic works well, both on random graphs and on graphs modeling also on realistic scenarios.

Convex Analysis for Processing Hyperspectral Images and Data from Hadamard Spaces (2017)

Martin J. Montag

This thesis brings together convex analysis and hyperspectral image processing. Convex analysis is the study of convex functions and their properties. Convex functions are important because they admit minimization by efficient algorithms and the solution of many optimization problems can be formulated as minimization of a convex objective function, extending much beyond the classical image restoration problems of denoising, deblurring and inpainting. \(\hspace{1mm}\) At the heart of convex analysis is the duality mapping induced within the class of convex functions by the Fenchel transform. In the last decades efficient optimization algorithms have been developed based on the Fenchel transform and the concept of infimal convolution. \(\hspace{1mm}\) The infimal convolution is of similar importance in convex analysis as the convolution in classical analysis. In particular, the infimal convolution with scaled parabolas gives rise to the one parameter family of Moreau-Yosida envelopes, which approximate a given function from below while preserving its minimum value and minimizers. The closely related proximal mapping replaces the gradient step in a recently developed class of efficient first-order iterative minimization algorithms for non-differentiable functions. For a finite convex function, the proximal mapping coincides with a gradient step of its Moreau-Yosida envelope. Efficient algorithms are needed in hyperspectral image processing, where several hundred intensity values measured in each spatial point give rise to large data volumes. \(\hspace{1mm}\) In the \(\textbf{first part}\) of this thesis, we are concerned with models and algorithms for hyperspectral unmixing. As part of this thesis a hyperspectral imaging system was taken into operation at the Fraunhofer ITWM Kaiserslautern to evaluate the developed algorithms on real data. Motivated by missing-pixel defects common in current hyperspectral imaging systems, we propose a total variation regularized unmixing model for incomplete and noisy data for the case when pure spectra are given. We minimize the proposed model by a primal-dual algorithm based on the proximum mapping and the Fenchel transform. To solve the unmixing problem when only a library of pure spectra is provided, we study a modification which includes a sparsity regularizer into model. \(\hspace{1mm}\) We end the first part with the convergence analysis for a multiplicative algorithm derived by optimization transfer. The proposed algorithm extends well-known multiplicative update rules for minimizing the Kullback-Leibler divergence, to solve a hyperspectral unmixing model in the case when no prior knowledge of pure spectra is given. \(\hspace{1mm}\) In the \(\textbf{second part}\) of this thesis, we study the properties of Moreau-Yosida envelopes, first for functions defined on Hadamard manifolds, which are (possibly) infinite-dimensional Riemannian manifolds with negative curvature, and then for functions defined on Hadamard spaces. \(\hspace{1mm}\) In particular we extend to infinite-dimensional Riemannian manifolds an expression for the gradient of the Moreau-Yosida envelope in terms of the proximal mapping. With the help of this expression we show that a sequence of functions converges to a given limit function in the sense of Mosco if the corresponding Moreau-Yosida envelopes converge pointwise at all scales. \(\hspace{1mm}\) Finally we extend this result to the more general setting of Hadamard spaces. As the reverse implication is already known, this unites two definitions of Mosco convergence on Hadamard spaces, which have both been used in the literature, and whose equivalence has not yet been known.

Einfaches Motion Capturing in MATLAB (2017)

Andreas Roth

Der vorliegende Artikel befasst sich mit der Realisierung eines einfachen Motion Capturing Verfahrens in MATLAB als Vorschlag für eine Umsetzung in der Schule. Die zugrunde liegende Mathematik kann ab der Mittelstufe leicht vermittelt werden. Je nach technischer Ausstattung können mit einfachen Mitteln farbige Marker in Videos oder Webcam-Streams verfolgt werden. Notwendige Konzepte und Algorithmen werden im Artikel beleuchtet.

Wir entwickeln einen Synthesizer (2017)

Patrick Capraro

Die Akustik liefert einen interessanten Hintergrund, interdisziplinären und fächerverbindenen Unterricht zwischen Mathematik, Physik und Musik durchzuführen. SchülerInnen können hierbei beispielsweise experimentell tätig sein, indem sie Audioaufnahmen selbst erzeugen und sich mit Computersoftware Frequenzspektren erzeugen lassen. Genauso können die Schüler auch Frequenzspektren vorgeben und daraus Klänge erzeugen. Dies kann beispielsweise dazu dienen, den Begriff der Obertöne im Musikunterricht physikalisch oder mathematisch greifbar zu machen oder in der Harmonielehre Frequenzverhältnisse von Intervallen und Dreiklängen näher zu untersuchen. Der Computer ist hier ein sehr nützliches Hilfsmittel, da der mathematische Hintergrund dieser Aufgabe -- das Wechseln zwischen Audioaufnahme und ihrem Frequenzbild -- sich in der Fourier-Analysis findet, die für SchülerInnen äußerst anspruchsvoll ist. Indem man jedoch die Fouriertransformation als numerisches Hilfsmittel einführt, das nicht im Detail verstanden werden muss, lässt sich an anderer Stelle interessante Mathematik betreiben und die Zusammenhänge zwischen Akustik und Musik können spielerisch erfahren werden. Im folgenden Beitrag wird eine Herangehensweise geschildert, wie wir sie bereits bei der Felix-Klein-Modellierungswoche umgesetzt haben: Die SchülerInnen haben den Auftrag erhalten, einen Synthesizer zu entwickeln, mit dem verschiedene Musikinstrumente nachgeahmt werden können. Als Hilfsmittel haben sie eine kurze Einführung in die Eigenschaften der Fouriertransformation erhalten, sowie Audioaufnahmen verschiedener Instrumente.

Small self-centralizing subgroups in defect groups of finite classical groups (2017)

Pablo Luka

In this thesis, we consider a problem from modular representation theory of finite groups. Lluís Puig asked the question whether the order of the defect groups of a block \( B \) of the group algebra of a given finite group \( G \) can always be bounded in terms of the order of the vertices of an arbitrary simple module lying in \( B \). In characteristic \( 2 \), there are examples showing that this is not possible in general, whereas in odd characteristic, no such examples are known. For instance, it is known that the answer to Puig's question is positive in case that \( G \) is a symmetric group, by work of Danz, Külshammer, and Puig. Motivated by this, we study the cases where \( G \) is a finite classical group in non-defining characteristic or one of the finite groups \( G_2(q) \) or \( ³D_4(q) \) of Lie type, again in non-defining characteristic. Here, we generalize Puig's original question by replacing the vertices occurring in his question by arbitrary self-centralizing subgroups of the defect groups. We derive positive and negative answers to this generalized question. \[\] In addition to that, we determine the vertices of the unipotent simple \( GL_2(q) \)-module labeled by the partition \( (1,1) \) in characteristic \( 2 \). This is done using a method known as Brauer construction.

Graph Coloring Applications and Defining Sets in Graph Theory (2001)

Masoumeh Ahadi Moghaddam

Abstract The main theme of this thesis is about Graph Coloring Applications and Defining Sets in Graph Theory. As in the case of block designs, finding defining sets seems to be difficult problem, and there is not a general conclusion. Hence we confine us here to some special types of graphs like bipartite graphs, complete graphs, etc. In this work, four new concepts of defining sets are introduced: • Defining sets for perfect (maximum) matchings • Defining sets for independent sets • Defining sets for edge colorings • Defining set for maximal (maximum) clique Furthermore, some algorithms to find and construct the defining sets are introduced. A review on some known kinds of defining sets in graph theory is also incorporated, in chapter 2 the basic definitions and some relevant notations used in this work are introduced. chapter 3 discusses the maximum and perfect matchings and a new concept for a defining set for perfect matching. Different kinds of graph colorings and their applications are the subject of chapter 4. Chapter 5 deals with defining sets in graph coloring. New results are discussed along with already existing research results, an algorithm is introduced, which enables to determine a defining set of a graph coloring. In chapter 6, cliques are discussed. An algorithm for the determination of cliques using their defining sets. Several examples are included.

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