Stationary distribution of reflected O-U process with two-sided barriers (Q1003418): Difference between revisions

The reflected Ornstein-Uhlenbeck process with two-sided barriers \ \(0\) \ and \ \(d\) \ (\(d>0\)) \ is defined by a unique strong solution to the stochastic differential equation: \[ d Z_t = (\mu-\alpha Z_t)\,d t + \sigma\,d B_t + d L_t - d U_t, \quad t\geq 0; \qquad Z_0=x\in [0,d], \] where \ \((B_t)_{t\geq 0}\) \ is a 1-dimensional standard Wiener process, \ \(\mu\in\mathbb{R}\), \ \(\alpha>0\), \ \(\sigma>0\) \ and \ \((L_t)_{t\geq 0}\) \ and \ \((U_t)_{t\geq 0}\) \ are uniquely determined continuous nondecreasing processes with \ \(L_0=U_0=0\) \ and \[ \int_0^t 1_{\{Z_s=0\}}\,d L_s=L_t, \qquad \int_0^t 1_{\{Z_s=d\}}\,d U_s=U_t,\qquad t\geq 0. \] First the authors derive the infinitesimal generator of this process using Itô's formula. Then they present a stationary distribution of the process showing that it has probability density \[ p(x)=\frac{e^{-\frac{\alpha}{\sigma^2}\left(x-\frac{\mu}{\alpha}\right)^2}} {\int_0^d e^{-\frac{\alpha}{\sigma^2} \left(y-\frac{\mu}{\alpha} \right)^2}\,d y}, \qquad x\in[0,d]. \] The cases \ \(\mu=0\) \ and \ \(\mu\neq 0\) \ are handled separately in the paper.