Local volatilityA local volatility model, in mathematical finance and financial engineering, is an option pricing model that treats volatility as a function of both the current asset level and of time . As such, it is a generalisation of the Black–Scholes model, where the volatility is a constant (i.e. a trivial function of and ). Local volatility models are often compared with stochastic volatility models, where the instantaneous volatility is not just a function of the asset level but depends also on a new "global" randomness coming from an additional random component.
Enthalpy of vaporizationIn thermodynamics, the enthalpy of vaporization (symbol ∆Hvap), also known as the (latent) heat of vaporization or heat of evaporation, is the amount of energy (enthalpy) that must be added to a liquid substance to transform a quantity of that substance into a gas. The enthalpy of vaporization is a function of the pressure at which the transformation (vaporization or evaporation) takes place. The enthalpy of vaporization is often quoted for the normal boiling temperature of the substance.
Lattice model (finance)In finance, a lattice model is a technique applied to the valuation of derivatives, where a discrete time model is required. For equity options, a typical example would be pricing an American option, where a decision as to option exercise is required at "all" times (any time) before and including maturity. A continuous model, on the other hand, such as Black–Scholes, would only allow for the valuation of European options, where exercise is on the option's maturity date.
Option (finance)In finance, an option is a contract which conveys to its owner, the holder, the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option. Options are typically acquired by purchase, as a form of compensation, or as part of a complex financial transaction.
Butterfly (options)In finance, a butterfly (or simply fly) is a limited risk, non-directional options strategy that is designed to have a high probability of earning a limited profit when the future volatility of the underlying asset is expected to be lower (when long the butterfly) or higher (when short the butterfly) than that asset's current implied volatility. A long butterfly position will make profit if the future volatility is lower than the implied volatility.
Stable distributionIn probability theory, a distribution is said to be stable if a linear combination of two independent random variables with this distribution has the same distribution, up to location and scale parameters. A random variable is said to be stable if its distribution is stable. The stable distribution family is also sometimes referred to as the Lévy alpha-stable distribution, after Paul Lévy, the first mathematician to have studied it. Of the four parameters defining the family, most attention has been focused on the stability parameter, (see panel).
Flash evaporationFlash evaporation (or partial evaporation) is the partial vapor that occurs when a saturated liquid stream undergoes a reduction in pressure by passing through a throttling valve or other throttling device. This process is one of the simplest unit operations. If the throttling valve or device is located at the entry into a pressure vessel so that the flash evaporation occurs within the vessel, then the vessel is often referred to as a flash drum.
AerosolAn aerosol is a suspension of fine solid particles or liquid droplets in air or another gas. Aerosols can be natural or anthropogenic. Examples of natural aerosols are fog or mist, dust, forest exudates, and geyser steam. Examples of anthropogenic aerosols include particulate air pollutants, mist from the discharge at hydroelectric dams, irrigation mist, perfume from atomizers, smoke, dust, steam from a kettle, sprayed pesticides, and medical treatments for respiratory illnesses.
Matrix decompositionIn the mathematical discipline of linear algebra, a matrix decomposition or matrix factorization is a factorization of a matrix into a product of matrices. There are many different matrix decompositions; each finds use among a particular class of problems. In numerical analysis, different decompositions are used to implement efficient matrix algorithms. For instance, when solving a system of linear equations , the matrix A can be decomposed via the LU decomposition.
EnthalpyEnthalpy ˈɛnθəlpi, a property of a thermodynamic system, is the sum of the system's internal energy and the product of its pressure and volume. It is a state function used in many measurements in chemical, biological, and physical systems at a constant pressure, which is conveniently provided by the large ambient atmosphere. The pressure–volume term expresses the work required to establish the system's physical dimensions, i.e. to make room for it by displacing its surroundings.
