A correction note on the first passage time of an Ornstein-Uhlenbeck process to a boundary (Q1979085)
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scientific article; zbMATH DE number 1452418
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| English | A correction note on the first passage time of an Ornstein-Uhlenbeck process to a boundary |
scientific article; zbMATH DE number 1452418 |
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A correction note on the first passage time of an Ornstein-Uhlenbeck process to a boundary (English)
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24 May 2000
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The derivation of the hitting time density of an Ornstein-Uhlenbeck process to a flat boundary is provided. The derivation relies on a change of measure approach and delivers an explicit formula. This formula is an amended expression of the result given by \textit{B. Leblanc} and \textit{O. Scaillet} [Finance Stoch. 2, No. 4, 349-367 (1998; Zbl 0913.60005)]. It corresponds to the formula given by a time substitution approach when the boundary level coincides with the mean of the invariant measure. It can for example be used to price digital up-and-in credit spread options when the logarithm of the credit spread is assumed to follow an Ornstein-Uhlenbeck process.
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hitting time
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Ornstein-Uhlenbeck process
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path dependent option
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0.8982819318771362
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0.8231915831565857
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0.8015574812889099
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0.7978773713111877
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0.7973025441169739
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