Approximating diffusion reflections at elastic boundaries

DOI10.1214/18-ECP141MaRDI QIDQ1663750zbMATH OpenFDO

Authors Dirk Becherer, Todor Bilarev, Peter Frentrup

Publication date 23 August 2018

Published in Electronic Communications in Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1710.06342, https://projecteuclid.org/euclid.ecp/1529546623

zbMATH Keywords

Laplace transformreflected diffusionelastic boundaryinverse local time

Mathematics Subject Classification ID

Diffusion processes (60J60) Functional limit theorems; invariance principles (60F17) Boundary theory for Markov processes (60J50) Local time and additive functionals (60J55) Numerical solutions to stochastic differential and integral equations (65C30)

Abstract: We show a probabilistic functional limit result for one-dimensional diffusion processes that are reflected at an elastic boundary which is a function of the reflection local time. Such processes are constructed as limits of a sequence of diffusions which are discretely reflected by small jumps at an elastic boundary, with reflection local times being approximated by $varepsilon$-step processes. The construction yields the Laplace transform of the inverse local time for reflection. Processes and approximations of this type play a role in finite fuel problems of singular stochastic control.

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