Improving Brownian approximations for boundary crossing problems

DOI10.3150/11-BEJ396MaRDI QIDQ1940752zbMATHFDO

Authors Robert W. Keener

Publication date 7 March 2013

Published in Bernoulli (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1301.7625

zbMATH Keywords

random walkBrownian motionhitting timesstopping timesDonsker's theorem

Mathematics Subject Classification ID

Sums of independent random variables; random walks (60G50) Probabilistic potential theory (60J45)

Abstract: Donsker's theorem shows that random walks behave like Brownian motion in an asymptotic sense. This result can be used to approximate expectations associated with the time and location of a random walk when it first crosses a nonlinear boundary. In this paper, correction terms are derived to improve the accuracy of these approximations.

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Cited in

(4)

• Algorithms for Brownian dynamics across discontinuities
• Corrected random walk approximations to free boundary problems in optimal stopping
• Recovering a distribution from its translated fractional moments
• Continuity correction: on the pricing of discrete double barrier options

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