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In this paper we consider the location of stops along the edges of an already existing public transportation network. This can be the introduction of bus stops along some given bus routes, or of railway stations along the tracks in a railway network. The positive effect of new stops is given by the better access of the potential customers to their closest station, while the increasement of travel time caused by the additional stopping activities of the trains leads to a negative effect. The goal is to cover all given demand points with a minimal amount of additional traveling time, where covering may be defined with respect to an arbitrary norm (or even a gauge). Unfortunately, this problem is NP-hard, even if only the Euclidean distance is used. In this paper, we give a reduction to a finite candidate set leading to a discrete set covering problem. Moreover, we identify network structures in which the coefficient matrix of the resulting set covering problem is totally unimodular, and use this result to derive efficient solution approaches. Various extensions of the problem are also discussed.

In this work we use the Parsimonious Multi–Asset Heston model recently developed in [Dimitroff et al., 2009] at Fraunhofer ITWM, Department Financial Mathematics, Kaiserslautern (Germany) and apply it to Quanto options. We give a summary of the model and its calibration scheme. A suitable transformation of the Quanto option payoff is explained and used to price Quantos within the new framework. Simulated prices are given and compared to market prices and Black–Scholes prices. We find that the new approach underprices the chosen options, but gives better results than the Black–Scholes approach, which is prevailing in the literature on Quanto options.