Occupation times of refracted Lévy processes

DOI10.1007/S10959-013-0501-4zbMATH Open1306.60049arXiv1205.0756OpenAlexW2044739946MaRDI QIDQ482802FDOQ482802

J. C. Pardo, José Luis Pérez Garmendia, A. E. Kyprianou

Publication date: 6 January 2015

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

Abstract: A refracted L'evy process is a L'evy process whose dynamics change by subtracting off a fixed linear drift (of suitable size) whenever the aggregate process is above a pre-specified level. More precisely, whenever it exists, a refracted L'evy process is described by the unique strong solution to the stochastic differential equation [ ud U_t=-deltamathbf{1}_{{U_t>b}}ud t +ud X_t, ] where $X=(X_t,tge0)$ is a L'evy process with law $p$ and $b,deltainR$ such that the resulting process $U$ may visit the half line $(b,infty)$ with positive probability. In this paper, we consider the case that $X$ is spectrally negative and establish a number of identities for the following functionals [ int_0^inftymathbf{1}_{{U_t<b}}ud t, quadint_0^{ ho_a^+}mathbf{1}_{{U_t<b}}ud t, quadint_0^{ ho^-_c}mathbf{1}_{{U_t<b}}ud t, quadint_0^{ ho_a^+land ho^-_c}mathbf{1}_{{U_t<b}}ud t, ] where $h{o}_a^{+}=inftge0:U_t>a$ and $h{o}_c^{-}=inftge0:U_t<c$ for $c<b<a$. Our identities extend recent results of Landriault et al. cite{LRZ} and bear relevance to Parisian-type financial instruments and insurance scenarios.

Full work available at URL: https://arxiv.org/abs/1205.0756

zbMATH Keywords

occupation timesstochastic differential equationsfluctuation theoryrefracted Lévy processes

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10)

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Cited In (30)

• \(n\)-dimensional Laplace transforms of occupation times for pre-exit diffusion processes
• An occupation time related potential measure for diffusion processes
• On the Bailout Dividend Problem for Spectrally Negative Markov Additive Models
• TheW,Zscale functions kit for first passage problems of spectrally negative Lévy processes, and applications to control problems
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• The time of deducting fees for variable annuities under the state-dependent fee structure

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