Lie symmetries methods in boundary crossing problems for diffusion processes

DOI10.1007/S10440-020-00336-8MaRDI QIDQ829565zbMATH OpenOpenAlexFDO

Authors Dmitry Muravey

Publication date 6 May 2021

Published in Acta Applicandae Mathematicae (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1807.03700

zbMATH Keywords

hitting timediffusion processesLie symmetry groupsboundary-crossing probabilityfirst hitting time density

Mathematics Subject Classification ID

Diffusion processes (60J60) Applications of Lie groups to the sciences; explicit representations (22E70) Fokker-Planck equations (35Q84) Stochastic methods (Fokker-Planck, Langevin, etc.) applied to problems in time-dependent statistical mechanics (82C31)

Abstract: This paper uses Lie symmetry methods to analyze boundary crossing probabilities for a large class of diffusion processes. We show that if Fokker--Planck--Kolmogorov equation has non-trivial Lie symmetry, then boundary crossing identity exists and depends only on parameters of process and symmetry. For time-homogeneous diffusion processes we found necessary and sufficient conditions of symmetries' existence. This paper shows that if drift function satisfy one of a family of Ricatti equations, then the problem has nontrivial Lie symmetries. For each case we present symmetries in explicit form. Based on obtained results, we derive two-parametric boundary crossing identities and prove its uniqueness. Further, we present boundary crossing identities between different process. We show, that if the problem has 6 or 4 group of symmetries then the first passage time density to any boundary can be explicitly represented in terms of the first passage time by Brownian motion or Bessel process. Many examples are presented to illustrate the method.

Recommendations

• The calculation of expectations for classes of diffusion processes by Lie symmetry methods
• Lie symmetry methods for multi-dimensional parabolic PDEs and diffusions
• A symmetry-based constructive approach to probability densities for one-dimensional diffusion processes
• Fundamental solutions, transition densities and the integration of Lie symmetries
• On first-passage-time and transition densities for strongly symmetric diffusion processes

Cites work

• scientific article; zbMATH DE number 1817636 (Why is no real title available?)
• scientific article; zbMATH DE number 3863589 (Why is no real title available?)
• scientific article; zbMATH DE number 3718308 (Why is no real title available?)
• scientific article; zbMATH DE number 3736754 (Why is no real title available?)
• scientific article; zbMATH DE number 473351 (Why is no real title available?)
• scientific article; zbMATH DE number 478435 (Why is no real title available?)
• scientific article; zbMATH DE number 3454716 (Why is no real title available?)
• Analytic crossing probabilities for certain barriers by Brownian motion
• Approximations of boundary crossing probabilities for a Brownian motion
• Boundary crossing identities for Brownian motion and some nonlinear ODE's
• Boundary crossing of Brownian motion. Its relation to the law of the iterated logarithm and to sequential analysis
• Crossing probabilities for a square root boundary by a bessel process
• Eigenvalue expansions for diffusion hitting times
• First exit time probability for multidimensional diffusions: A PDE-based approach
• First-passage phenomena and their applications
• First-passage-time densities for time-non-homogeneous diffusion processes
• Fundamental solutions to Kolmogorov equations via reduction to canonical form
• Hitting time for Bessel processes-walk on moving spheres algorithm (WoMS)
• Hitting times of Bessel processes, volume of the Wiener sausages and zeros of Macdonald functions
• Markov functions
• On Stopping Times for a Wiener Process
• On boundary crossing probabilities for diffusion processes
• On integral equations arising in the first-passage problem for Brownian motion
• On the Transformation of Diffusion Processes into the Wiener Process
• On the first hitting time and the last exit time for a Brownian motion to/from a moving boundary
• On the solution of the Fokker–Planck equation for a Feller process
• On the transformation of diffusion equations and boundaries into the Kolmogorov equation for the Wiener process
• On the two-boundary first-crossing-time problem for diffusion processes
• PRICING AND HEDGING DOUBLE‐BARRIER OPTIONS: A PROBABILISTIC APPROACH
• Parametrix method for the first hitting time of an elliptic diffusion with irregular coefficients
• Pricing Barrier Options with Time–Dependent Coefficients
• Pricing Options With Curved Boundaries¹
• Renewal series and square-root boundaries for Bessel processes
• Representations of the First Hitting Time Density of an Ornstein-Uhlenbeck Process¹
• Smooth first-passage densities for one-dimensional diffusions
• Tests with parabolic boundary for the drift of a Wiener process
• The calculation of expectations for classes of diffusion processes by Lie symmetry methods
• The minimum of a stationary Markov process superimposed on a U-shaped trend
• The spectral decomposition of a diffusion hitting time
• Valuation of default-sensitive claims under imperfect information
• Weighted Kolmogorov Smirnov testing: an alternative for Gene Set Enrichment Analysis

Cited in

(3)

• Optimal investment and reinsurance strategies under 4/2 stochastic volatility model
• The calculation of expectations for classes of diffusion processes by Lie symmetry methods
• Lie symmetry methods for multi-dimensional parabolic PDEs and diffusions

This page was built for publication: Lie symmetries methods in boundary crossing problems for diffusion processes

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q829565)