On mean exit time from a curvilinear domain (Q956351)

From MaRDI portal
scientific article
Language Label Description Also known as
English
On mean exit time from a curvilinear domain
scientific article

    Statements

    On mean exit time from a curvilinear domain (English)
    0 references
    0 references
    25 November 2008
    0 references
    Let \(M_t=(x_t,y_t)\) solve \(dx_t=\theta(x_t)dt+\beta(x_t)d B_t^{(1)}\), \(dy_t=\mu y_tdt+(\gamma x_t^{1/2}+\alpha)y_td B_t^{(2)}\) \((B^{(1)},B^{(2)}\) Brownian Motion, \(M_0=(x,y)\), on \(D_\psi=\{(x,y)\in\mathbb{R}^2:y>\psi(x)\}\). Securing that \(M_t\) is non-explosive and simply applying ItĂ´'s and Dynkin's formulas, the mean exit time of \(M_t\) from \(D_\psi\) is obtained for \(\psi\) solving a particular nonlinear second-order differential equation involving \(\alpha,\beta, \gamma,\theta,\mu\). Several examples are discussed.
    0 references
    0 references
    coupled diffusion
    0 references
    curvelinear domain
    0 references
    mean exit time
    0 references
    option pricing
    0 references
    0 references