Can time-homogeneous diffusions produce any distribution?

DOI10.1007/S00440-011-0405-0MaRDI QIDQ1950378zbMATH OpenOpenAlexFDO

Authors Erik Ekström, David Hobson, Svante Janson, Johan Tysk

Publication date 13 May 2013

Published in Zeitschrift für Wahrscheinlichkeitstheorie und Verwandte Gebiete (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1103.4371

zbMATH Keywords

continuous time martingalesgeneralized diffusionsrandom time changespeed measure

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Applications of stochastic analysis (to PDEs, etc.) (60H30) Diffusion processes (60J60)

Abstract: Given a centred distribution, can one find a time-homogeneous martingale diffusion starting at zero which has the given law at time 1? We answer the question affirmatively if generalized diffusions are allowed.

Review text

A scalar generalized diffusion is constructed by random time change of a scalar Brownian motion which depends on a prescribed non-negative `speed' measure. For a probability measure on line with finite mean, a speed measure can be chosen so that the corresponding generalized diffusion is a martingale whose time one distribution is the given probability measure. The proof is based on a construction for finitely supported speed measures, followed by a limiting argument for the general case. Application to an inverse problem in mathematical finance is given, followed by a characterization of speed measures which lead to generalized diffusions that are local martingales.

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Cited in

(9)

• Tensor approximation of generalized correlated diffusions and functional copula operators
• Existence and uniqueness results for time-inhomogeneous time-change equations and Fokker-Planck equations
• Time homogeneous diffusion with drift and killing to meet a given marginal
• On Skorokhod embeddings and Poisson equations
• Feynman-Kac theorems for generalized diffusions
• Local variance gamma and explicit calibration to option prices
• Mimicking an Itō process by a solution of a stochastic differential equation
• The Wronskian parametrises the class of diffusions with a given distribution at a random time
• Fractal Transformation of Krein–Feller Operators

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