Ben Hambly

Uniqueness for the signature of a path of bounded variation and the reduced path group

We introduce the notions of tree-like path and tree-like equivalence between paths and prove that the latter is an equivalence relation for paths of finite length. We show that the equivalence classes form a group with some similarity to a free group, and that in each class there is one special tree reduced path. The set of these paths is the Reduced Path Group. It is a continuous analogue to the group of reduced words. The signature of the path is a power series whose coefficients are definite iterated integrals of the path. We identify the paths with trivial signature as the tree-like paths, and prove that two paths are in tree-like equivalence if and only if they have the same signature. In this way, we extend Chens theorems on the uniqueness of the sequence of iterated integrals associated with a piecewise regular path to finite length paths and identify the appropriate extended meaning for reparameterisation in the general setting. It is suggestive to think of this result as a non-commutative analogue of the result that integrable functions on the circle are determined, up to Lebesgue null sets, by their Fourier coefficients. As a second theme we give quantitative versions of Chens theorem in the case of lattice paths and paths with continuous derivative, and as a corollary derive results on the triviality of exponential products in the tensor algebra.

Modelling spikes and pricing swing options in electricity markets

Most electricity markets exhibit high volatilities and occasional distinctive price spikes, which result in demand for derivative products which protect the holder against high prices. In this paper we examine a simple spot price model that is the exponential of the sum of an Ornstein–Uhlenbeck and an independent mean-reverting pure jump process. We derive the moment generating function as well as various approximations to the probability density function of the logarithm of the spot price process at maturity T. Hence we are able to calibrate the model to the observed forward curve and present semi-analytic formulae for premia of path-independent options as well as approximations to call and put options on forward contracts with and without a delivery period. In order to price path-dependent options with multiple exercise rights like swing contracts a grid method is utilized which in turn uses approximations to the conditional density of the spot process.

Random fractal strings: their zeta functions, complex dimensions and spectral asymptotics

In this paper a string is a sequence of positive non-increasing real numbers which sums to one. For our purposes a fractal string is a string formed from the lengths of removed sub-intervals created by a recursive decomposition of the unit interval. By using the so-called complex dimensions of the string, the poles of an associated zeta function, it is possible to obtain detailed information about the behaviour of the asymptotic properties of the string. We consider random versions of fractal strings. We show that by using a random recursive self-similar construction, it is possible to obtain similar results to those for deterministic self-similar strings. In the case of strings generated by the excursions of stable subordinators, we show that the complex dimensions can only lie on the real line. The results allow us to discuss the geometric and spectral asymptotics of one-dimensional domains with random fractal boundary.

The characteristic polynomial of a random permutation matrix

We establish a central limit theorem for the logarithm of the characteristic polynomial of a random permutation matrix. We relate this result to a central limit theorem of Wieand for the counting function for the eigenvalues lying in some interval on the unit circle.

Stochastic Evolution Equations in Portfolio Credit Modelling

We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the asset values. This density evolves according to a stochastic partial differential equation, and we establish existence and uniqueness for the solution taking values in a suitable function space. The loss function of the portfolio is then a function of the evolution of this density at the default boundary. We develop numerical methods for pricing and calibration of the model to credit indices and consider its performance before and after the credit crunch.

A dual approach to multiple exercise option problems under constraints

This paper considers the pricing of multiple exercise options in discrete time. This type of option can be exercised up to a finite number of times over the lifetime of the contract. We allow multiple exercise of the option at each time point up to a constraint, a feature relevant for pricing swing options in energy markets. It is shown that, in the case where an option can be exercised an equal number of times at each time point, the problem can be reduced to the case of a single exercise possibility at each time. In the general case there is not a solution of this type. We develop a dual representation for the problem and give an algorithm for calculating both lower and upper bounds for the prices of such multiple exercise options.

FINITELY RAMIFIED GRAPH-DIRECTED FRACTALS, SPECTRAL ASYMPTOTICS AND THE MULTIDIMENSIONAL RENEWAL THEOREM

We consider the class of graph-directed constructions which are connected and have the property of finite ramification. By assuming the existence of a fixed point for a certain renormalization map, it is possible to construct a Laplace operator on fractals in this class via their Dirichlet forms. Our main aim is to consider the eigenvalues of the Laplace operator and provide a formula for the spectral dimension, the exponent determining the power-law scaling in the eigenvalue counting function, and establish generic constancy for the counting-function asymptotics. In order to do this we prove an extension of the multidimensional renewal theorem. As a result we show that it is possible for the eigenvalue counting function for fractals to require a logarithmic correction to the usual power-law growth.

SELF-SIMILAR ENERGIES ON POST-CRITICALLY FINITE SELF-SIMILAR FRACTALS

On a large class of post-critically finite (finitely ramified) self-similar fractals with possibly little symmetry, we consider the question of existence and uniqueness of a Laplace operator. By considering positive refinement weights (local scaling factors) which are not necessarily equal, we show that for each such fractal, under a certain condition, there are corresponding refinement weights which support a unique self-similar Dirichlet form. As compared with previous results, our technique allows us to replace symmetry by connectivity arguments.

Thick and thin points for random recursive fractals

We consider random recursive fractals and prove fine results about their local behaviour. We show that for a class of random recursive fractals the usual multifractal spectrum is trivial in that all points have the same local dimension. However, by examining the local behaviour of the measure at typical points in the set, we establish the size of fine fluctuations in the measure. The results are proved using a large deviation principle for a class of general branching processes which extends the known large deviation estimates for the supercritical Galton-Watson process.

Concentration results for a Brownian directed percolation problem

We consider the hydrodynamic limit for a certain Brownian directed percolation model, and establish uniform concentration results. In view of recent work on the connection between this directed percolation model and eigenvalues of random matrices, our results can also be interpreted as uniform concentration results at the process level for the largest eigenvalue of Hermitian Brownian motion.