Approximating the first passage time density from data using generalized Laguerre polynomials

DOI10.1016/J.CNSNS.2022.106991zbMATH Open1505.60002arXiv2206.02137OpenAlexW4308929867MaRDI QIDQ2684064FDOQ2684064

Authors: Giuseppe D'Onofrio, T. Martini, E. Di Nardo 

Publication date: 16 February 2023

Published in: Communications in Nonlinear Science and Numerical Simulation (Search for Journal in Brave)

Abstract: This paper analyzes a method to approximate the first passage time probability density function which turns to be particularly useful if only sample data are available. The method relies on a Laguerre-Gamma polynomial approximation and iteratively looks for the best degree of the polynomial such that the fitting function is a probability density function. The proposed iterative algorithm relies on simple and new recursion formulae involving first passage time moments. These moments can be computed recursively from cumulants, if they are known. In such a case, the approximated density can be used also for the maximum likelihood estimates of the parameters of the underlying stochastic process. If cumulants are not known, suitable unbiased estimators relying on k-statistics are employed. To check the feasibility of the method both in fitting the density and in estimating the parameters, the first passage time problem of a geometric Brownian motion is considered.

Full work available at URL: https://arxiv.org/abs/2206.02137

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zbMATH Keywords

recursive algorithmcumulantgeometric Brownian motionstochastic process\(\kappa\)-statistic

Mathematics Subject Classification ID

Computational methods for problems pertaining to probability theory (60-08) Markov processes: estimation; hidden Markov models (62M05) Diffusion processes (60J60) Approximations to statistical distributions (nonasymptotic) (62E17) General theory of stochastic processes (60G07)

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Cited In (1)

• A cumulant approach for the first-passage-time problem of the Feller square-root process

Uses Software

• Digital Library of Mathematical Functions
• ActuarialOrthogonalPolynomials

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