An exponential functional of random walks

DOI10.1239/JAP/1053003553zbMATH Open1028.60031arXiv1008.1512OpenAlexW1989289068MaRDI QIDQ4435683FDOQ4435683

Authors: Tamas Szabados, Balázs Székely 

Publication date: 17 November 2003

Published in: Journal of Applied Probability (Search for Journal in Brave)

Abstract: The aim of this paper is to investigate discrete approximations of the exponential functional $in{t}_0^{infty}exp(B(t)-ut)dit$ of Brownian motion (which plays an important role in Asian options of financial mathematics) by the help of simple, symmetric random walks. In some applications the discrete model could be even more natural than the continuous one. The properties of the discrete exponential functional are rather different from the continuous one: typically its distribution is singular w.r.t. Lebesgue measure, all of its positive integer moments are finite and they characterize the distribution. On the other hand, using suitable random walk approximations to Brownian motion, the resulting discrete exponential functionals converge a.s. to the exponential functional of Brownian motion, hence their limit distribution is the same as in the continuous case, namely, the one of the reciprocal of a gamma random variable, so absolutely continuous w.r.t. Lebesgue measure. This way we give a new, elementary proof for an earlier result by Dufresne and Yor as well.

Full work available at URL: https://arxiv.org/abs/1008.1512

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zbMATH Keywords

random walkstrong approximationself-similarityexponential functionalAsian option\(L^p\) limit

Mathematics Subject Classification ID

Sums of independent random variables; random walks (60G50) Functional limit theorems; invariance principles (60F17) (L^p)-limit theorems (60F25)

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Cited In (6)

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• Discrete integrable systems and Pitman's transformation
• A note on a Poissonian functional and a \(q\)-deformed dufresne identity
• Delta-functions on recurrent random walks
• Functional limit theorems for discounted exponential functional of random walk and discounted convergent perpetuity
• Exponential functionals of integrated processes

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