Optimal prediction for positive self-similar Markov processes
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Processes with independent increments; Lévy processes (60G51) Inference from stochastic processes and prediction (62M20) Prediction theory (aspects of stochastic processes) (60G25) Diffusion processes (60J60) Continuous-time Markov processes on general state spaces (60J25) Stopping times; optimal stopping problems; gambling theory (60G40) Self-similar stochastic processes (60G18)
Abstract: This paper addresses the question of predicting when a positive self-similar Markov process X attains its pathwise global supremum or infimum before hitting zero for the first time (if it does at all). This problem has been studied in Glover et al. (2013) under the assumption that X is a positive transient diffusion. We extend their result to the class of positive self-similar Markov processes by establishing a link to Baurdoux and van Schaik (2013), where the same question is studied for a Levy process drifting to minus infinity. The connection to Baurdoux and van Schaik (2013) relies on the so-called Lamperti transformation which links the class of positive self-similar Markov processes with that of Levy processes. Our approach will reveal that the results in Glover et al. (2013) for Bessel processes can also be seen as a consequence of self-similarity.
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