We investigate the extension of the multilevel Monte Carlo path simulation method to jump-diffusion SDEs. We consider models with finite rate activity , using a jump-adapted discretisation in which the jump times are computed and added to the standard uniform discretisation times. The key component in multilevel analysis is the calculation of an expected payoff difference between a coarse path simulation and a fine path simulation with twice as many timesteps. If the Poisson jump rate is constant, the jump times are the same on both paths and the multilevel extension is relatively straightforward, but the implementation is more complex in the case of state-dependent jump rates for which the jump times naturally differ.

We apply the multilevel Monte Carlo method for option pricing problems using exponential Lévy models with a uniform timestep discretisation. For lookback and barrier options, we derive estimates of the convergence rate of the error introduced by the discrete monitoring of the running supremum of a broad class of Lévy processes. We then use these to obtain upper bounds on the multilevel Monte Carlo variance convergence rate for the variance gamma, NIG and α-stable processes. We also provide an analysis of a trapezoidal approximation for Asian options. Our method is illustrated by numerical experiments.

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The main goal of this paper is to present a minmax programming model for the optimal dispatch of Traffic and Patrol Police Service Platforms with single traffic congestion. The objective is to minimize the longest time of the dispatch for Traffic and Patrol Police Service Platforms. Some numerical experiments are carried out, and the optimal project is given.