OCCUPATION TIMES OF BALLS BY BROWNIAN MOTION WITH DRIFT

2001 ◽  
Vol 22 (01) ◽  
pp. 47-56
Author(s):  
CHUANCUN YIN ◽  
SUNGNOK CHIU
Keyword(s):  
Brownian Motion ◽  
Occupation Times ◽  
Brownian Motion With Drift

scholarly journals Occupation Times, Drawdowns, and Drawups for One-Dimensional Regular Diffusions

2015 ◽  
Vol 47 (1) ◽  
pp. 210-230 ◽  
Author(s):  
Hongzhong Zhang
Keyword(s):  
Brownian Motion ◽  
Diffusion Process ◽  
Time Horizon ◽  
Three Dimensional ◽  
Bessel Processes ◽  
Occupation Times ◽  
Exponential Time ◽  
One Dimensional ◽  
Brownian Motion With Drift ◽  
Running Maximum

The drawdown process of a one-dimensional regular diffusion process X is given by X reflected at its running maximum. The drawup process is given by X reflected at its running minimum. We calculate the probability that a drawdown precedes a drawup in an exponential time-horizon. We then study the law of the occupation times of the drawdown process and the drawup process. These results are applied to address problems in risk analysis and for option pricing of the drawdown process. Finally, we present examples of Brownian motion with drift and three-dimensional Bessel processes, where we prove an identity in law.

scholarly journals Some applications of occupation times of Brownian motion with drift in mathematical finance

1999 ◽  
Vol 3 (1) ◽  
pp. 63-73 ◽  
Author(s):  
Andreas Pechtl
Keyword(s):  
Brownian Motion ◽  
Closed Form ◽  
Mathematical Finance ◽  
European Options ◽  
Options Markets ◽  
Occupation Times ◽  
Simple Derivation ◽  
Brownian Motion With Drift ◽  
Derivative Instruments ◽  
Path Dependent

In the last few years new types of path-dependent options called corridor options or range options have become well-known derivative instruments in European options markets. Since the payout profiles of those options are based on occupation times of the underlying security the purpose of this paper is to provide closed form pricing formulae of Black & Scholes type for some significant representatives. Alternatively we demonstrate in this paper a relatively simple derivation of the Black & Scholes price for a single corridor option – based on a static portfolio representation – which does not make use of the distribution of occupation times (of Brownian motion). However, knowledge of occupation times' distributions is a more powerful tool.

scholarly journals Distributions of occupation times of Brownian motion with drift

1999 ◽  
Vol 3 (1) ◽  
pp. 41-62 ◽  
Author(s):  
Andreas Pechtl
Keyword(s):  
Brownian Motion ◽  
Closed Form ◽  
Mathematical Finance ◽  
Occupation Times ◽  
Brownian Motion With Drift ◽  
Recent Developments ◽  
Sine Law ◽  
Straightforward Proof

The purpose of this paper is to present a survey of recent developments concerning the distributions of occupation times of Brownian motion and their applications in mathematical finance. The main result is a closed form version for Akahori's generalized arc-sine law which can be exploited for pricing some innovative types of options in the Black & Scholes model. Moreover a straightforward proof for Dassios' representation of the α -quantile of Brownian motion with drift shall be provided.

scholarly journals Occupation Times, Drawdowns, and Drawups for One-Dimensional Regular Diffusions

2015 ◽  
Vol 47 (01) ◽  
pp. 210-230 ◽  
Author(s):  
Hongzhong Zhang
Keyword(s):  
Brownian Motion ◽  
Diffusion Process ◽  
Time Horizon ◽  
Three Dimensional ◽  
Bessel Processes ◽  
Occupation Times ◽  
Exponential Time ◽  
One Dimensional ◽  
Brownian Motion With Drift ◽  
Running Maximum

The drawdown process of a one-dimensional regular diffusion processXis given byXreflected at its running maximum. The drawup process is given byXreflected at its running minimum. We calculate the probability that a drawdown precedes a drawup in an exponential time-horizon. We then study the law of the occupation times of the drawdown process and the drawup process. These results are applied to address problems in risk analysis and for option pricing of the drawdown process. Finally, we present examples of Brownian motion with drift and three-dimensional Bessel processes, where we prove an identity in law.

THE FEYNMAN–KAC FORMULA AND PRICING OCCUPATION TIME DERIVATIVES

1999 ◽  
Vol 02 (02) ◽  
pp. 153-178 ◽  
Author(s):  
JULIEN-N. HUGONNIER
Keyword(s):  
Brownian Motion ◽  
Time Derivative ◽  
Occupation Time ◽  
Barrier Options ◽  
Occupation Times

In this paper, we undertake a study of occupation time derivatives that is derivatives for which the pay-off is contingent on both the terminal asset's price and one of its occupation times. To this end we use a formula of M. Kac to compute the joint law of Brownian motion and one of its occupation times. General pricing formulas for occupation time derivatives are established and it is shown that any occupation time derivative can be continuously hedged by a controlled portfolio of the basic securities. We further study some examples of interest including cumulative barrier options and discuss some numerical implementations.

scholarly journals Second-order limit laws for occupation times of fractional Brownian motion

2017 ◽  
Vol 54 (2) ◽  
pp. 444-461 ◽  
Author(s):  
Fangjun Xu
Keyword(s):  
Brownian Motion ◽  
Fractional Brownian Motion ◽  
Method Of Moments ◽  
Second Order ◽  
Hurst Index ◽  
Occupation Times ◽  
Limit Laws ◽  
Additive Functionals ◽  
Finite Dimensional ◽  
Functional Version

Abstract We prove a second-order limit law for additive functionals of a d-dimensional fractional Brownian motion with Hurst index H = 1 / d, using the method of moments and extending the Kallianpur–Robbins law, and then give a functional version of this result. That is, we generalize it to the convergence of the finite-dimensional distributions for corresponding stochastic processes.

scholarly journals Occupation Times for Markov-Modulated Brownian Motion

2012 ◽  
Vol 49 (02) ◽  
pp. 549-565 ◽  
Author(s):  
Lothar Breuer
Keyword(s):  
Brownian Motion ◽  
First Passage Time ◽  
Passage Time ◽  
Laplace Transforms ◽  
Occupation Times ◽  
First Passage ◽  
Scale Functions ◽  
Positive Variation ◽  
Markov Modulated

In this paper we determine the distributions of occupation times of a Markov-modulated Brownian motion (MMBM) in separate intervals before a first passage time or an exit from an interval. We derive the distributions in terms of their Laplace transforms, and we also distinguish between occupation times in different phases. For MMBMs with strictly positive variation parameters, we further propose scale functions.

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