Hidden geometry of bidirectional grid-constrained stochastic processes

DOI10.1155/2021/9944543MaRDI QIDQ2039161zbMATH OpenOpenAlexFDO

Authors Aldo Taranto, Shahjahan Khan

Publication date 2 July 2021

Published in Journal of Probability and Statistics (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://arxiv.org/abs/2103.12859

Mathematics Subject Classification ID

Diffusion processes (60J60)

Abstract: Bi-Directional Grid Constrained (BGC) stochastic processes (BGCSP) are constrained It^{o} diffusions with the property that the further they drift away from the origin, the more resistance to movement in that direction they undergo. We investigate the underlying characteristics of the BGC parameter $Psi(x,t)$ by examining its geometric properties. The most appropriate convex form for $Psi$, i.e. the parabolic cylinder is identified after extensive simulation of various possible forms. The formula for the resulting hidden reflective barrier(s) is determined by comparing it with the simpler Ornstein-Uhlenbeck process (OUP). Applications of BGCSP arise when a series of semipermeable barriers are present, such as regulating interest rates and chemical reactions under concentration gradients, which gives rise to two hidden reflective barriers.

Review text

Summary: Bidirectional Grid Constrained (BGC) stochastic processes (BGCSPs) are constrained Itô diffusions with the property that the further they drift away from the origin, the more the resistance to movement in that direction they undergo. The underlying characteristics of the BGC parameter \(\Psi(X_t, t)\) are investigated by examining its geometric properties. The most appropriate convex form for \(\Psi\), that is, the parabolic cylinder is identified after extensive simulation of various possible forms. The formula for the resulting hidden reflective barrier(s) is determined by comparing it with the simpler Ornstein-Uhlenbeck process (OUP). Applications of BGCSP arise when a series of semipermeable barriers are present, such as regulating interest rates and chemical reactions under concentration gradients, which gives rise to two hidden reflective barriers.

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