Joint distribution of a spectrally negative Lévy process and its occupation time, with step option pricing in view

DOI10.1017/APR.2015.17MaRDI QIDQ2806357zbMATH OpenOpenAlexFDO

Authors Hélène Guérin, Jean-François Renaud

Publication date 17 May 2016

Published in Advances in Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1406.3130, https://projecteuclid.org/euclid.aap/1457466166

zbMATH Keywords

occupation timescale functionfluctuation theorystep option pricingspectrally negative Lévy processLévy jump-diffusion model

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Derivative securities (option pricing, hedging, etc.) (91G20) Diffusion processes (60J60) Financial applications of other theories (91G80)

Abstract: For a spectrally negative L'evy process $X$, we study the following distribution: ${\displaystyle }$ mathbb{E}_x left[ mathrm{e}^{- q int_0^t mathbf{1}_{(a,b)} (X_s) mathrm{d}s } ; X_t in mathrm{d}y ight], ${\displaystyle }$ where $-inftyleqa<b<infty$, and where $q,t>0$ and $xinmathbbR$. More precisely, we identify the Laplace transform with respect to $t$ of this measure in terms of the scale functions of the underlying process. Our results are then used to price step options and the particular case of an exponential spectrally negative L'evy jump-diffusion model is discussed.

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Cited in

(21)

• Sojourn times of Gaussian processes with trend
• An occupation time related potential measure for diffusion processes
• Occupation times of general Lévy processes
• Bridging the first and last passage times for Lévy models
• A note on series representation for the \(q\)-scale function of a class of spectrally negative Lévy processes
• Joint occupation times in an infinite interval for spectrally negative Lévy processes on the last exit time
• A note on joint occupation times of spectrally negative Lévy risk processes with tax
• A note on Parisian ruin with an ultimate bankruptcy level for Lévy insurance risk processes
• Occupation times of intervals until first passage times for spectrally negative Lévy processes
• On q-scale functions of spectrally negative Lévy processes
• Accuracy of discrete approximation for integral functionals of Markov processes
• Weak approximation rates for integral functionals of Markov processes
• Poissonian occupation times of refracted Lévy processes with applications
• The bilateral Gamma motion: calibration and option pricing
• Occupation times of alternating renewal processes with Lévy applications
• On the distribution of cumulative Parisian ruin
• On occupation times in the red of Lévy risk models
• Fluctuations of Omega-killed spectrally negative Lévy processes
• Local times for spectrally negative Lévy processes
• How long does the surplus stay close to its historical high?
• Poissonian occupation times of spectrally negative Lévy processes with applications

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