On strong solutions for positive definite jump diffusions

DOI10.1016/J.SPA.2011.05.006zbMATH Open1225.60096arXiv0910.1784OpenAlexW1971112730MaRDI QIDQ554460FDOQ554460

Authors: Eberhard Mayerhofer, Robert Stelzer, Oliver Pfaffel 

Publication date: 4 August 2011

Published in: Stochastic Processes and their Applications (Search for Journal in Brave)

Abstract: We show the existence of unique global strong solutions of a class of stochastic differential equations on the cone of symmetric positive definite matrices. Our result includes affine diffusion processes and therefore extends considerably the known statements concerning Wishart processes, which have recently been extensively employed in financial mathematics. Moreover, we consider stochastic differential equations where the diffusion coefficient is given by the alpha-th positive semidefinite power of the process itself with 0.5<alpha<1 and obtain existence conditions for them. In the case of a diffusion coefficient which is linear in the process we likewise get a positive definite analogue of the univariate GARCH diffusions.

Full work available at URL: https://arxiv.org/abs/0910.1784

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zbMATH Keywords

strong solutionsWishart processesaffine diffusionsjump diffusion processes on positive definite matriceslocal martingales on stochastic intervalsmatrix subordinatorsstochastic differential equations on open sets

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Diffusion processes (60J60) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10)

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Cited In (33)

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• Calibration and advanced simulation schemes for the Wishart stochastic volatility model
• Long-term optimal investment in matrix valued factor models
• The explicit Laplace transform for the Wishart process
• Structural properties of the seed bank and the two island diffusion
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• Affine diffusions with non-canonical state space
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