On the drawdowns and drawups in diffusion-type models with running maxima and minima

JOURNAL OF MATHEMATICAL ANALYSIS AND APPLICATIONS

卷:434

Article

Gapeev, Pavel V.¹  Rodosthenous, Neofytos² 

[1] London Sch Econ, Dept Math, London WC2A 2AE, England

[2] Queen Mary Univ London, Sch Math Sci, London E1 4NS, England

关键词: Laplace transforms;    Diffusion-type processes;    Running maximum and minimum processes;    Running maximum drawdown and maximum drawup processes;    Boundary-value problems;    Normal reflection;   

DOI  :  10.1016/j.jmaa.2015.09.013

来源: Elsevier

【 摘 要 】

We obtain closed-form expressions for the values of joint Laplace transforms of the running maximum and minimum of a diffusion-type process stopped at the first time at which the associated drawdown and drawup processes hit constant levels. It is assumed that the coefficients of the diffusion-type process are regular functions of the running values of the process itself, its maximum and minimum, as well as its maximum drawdown and maximum drawup processes. The proof is based on the solution to the equivalent boundary-value problems and application of the normal-reflection conditions for the value functions at the edges of the state space of the resulting five-dimensional Markov process. We show that the joint Laplace transforms represent linear combinations of solutions to the systems of first-order partial differential equations arising from the application of the normal-reflection conditions. (C) 2015 Elsevier Inc. All rights reserved.

【 授权许可】

Free