The calculation of expectations for classes of diffusion processes by Lie symmetry methods

DOI10.1214/08-AAP534zbMATH Open1227.35028arXiv0902.4806MaRDI QIDQ1009482FDOQ1009482

Authors: Mark Craddock, Kelly A. Lennox 

Publication date: 2 April 2009

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Abstract: This paper uses Lie symmetry methods to calculate certain expectations for a large class of It^{o} diffusions. We show that if the problem has sufficient symmetry, then the problem of computing functionals of the form $E_x(e^{-lambda{X}_t-in{t}_0^{t}g(X_s)ds})$ can be reduced to evaluating a single integral of known functions. Given a drift $f$ we determine the functions $g$ for which the corresponding functional can be calculated by symmetry. Conversely, given $g$, we can determine precisely those drifts $f$ for which the transition density and the functional may be computed by symmetry. Many examples are presented to illustrate the method.

Full work available at URL: https://arxiv.org/abs/0902.4806

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zbMATH Keywords

transition densities

Mathematics Subject Classification ID

Symmetries, invariants, etc. in context of PDEs (35B06) Solutions to PDEs in closed form (35C05) Initial value problems for second-order parabolic equations (35K15) PDEs with randomness, stochastic partial differential equations (35R60) Fundamental solutions to PDEs (35A08) Stochastic analysis (60H99)

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Cited In (23)

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• Parameter Estimation for the Square-Root Diffusions: Ergodic and Nonergodic Cases
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• LESS-EXPENSIVE VALUATION AND RESERVING OF LONG-DATED VARIABLE ANNUITIES WHEN INTEREST RATES AND MORTALITY RATES ARE STOCHASTIC
• Exact simulation of the 3/2 model
• Approximation of expectation of diffusion processes based on Lie algebra and Malliavin calculus
• Calibration to FX triangles of the 4/2 model under the benchmark approach
• Pricing volatility derivatives under the modified constant elasticity of variance model
• Pricing and hedging of long dated variance swaps under a \(3/2\) volatility model
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• Asymptotic behavior of the maximum likelihood estimator for ergodic and nonergodic square-root diffusions
• New classes of non-convolution integral equations arising from Lie symmetry analysis of hyperbolic pdes
• Reduction and reconstruction of SDEs via Girsanov and quasi Doob symmetries
• Equivalence and symmetries for variable coefficient linear heat type equations. II. Fundamental solutions
• Equivalence and symmetries for variable coefficient linear heat type equations. I
• Lie symmetry methods for multi-dimensional parabolic PDEs and diffusions
• Large Deviations for the Squared Radial Ornstein--Uhlenbeck Process
• Hodograph Transformations and Cauchy Problem to Systems of Nonlinear Parabolic Equations
• Symmetries of stochastic differential equations using Girsanov transformations

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