Lie symmetries methods in boundary crossing problems for diffusion processes

DOI10.1007/S10440-020-00336-8zbMATH Open1460.60091arXiv1807.03700OpenAlexW3034658043MaRDI QIDQ829565FDOQ829565

Authors: Dmitry Muravey 

Publication date: 6 May 2021

Published in: Acta Applicandae Mathematicae (Search for Journal in Brave)

Abstract: This paper uses Lie symmetry methods to analyze boundary crossing probabilities for a large class of diffusion processes. We show that if Fokker--Planck--Kolmogorov equation has non-trivial Lie symmetry, then boundary crossing identity exists and depends only on parameters of process and symmetry. For time-homogeneous diffusion processes we found necessary and sufficient conditions of symmetries' existence. This paper shows that if drift function satisfy one of a family of Ricatti equations, then the problem has nontrivial Lie symmetries. For each case we present symmetries in explicit form. Based on obtained results, we derive two-parametric boundary crossing identities and prove its uniqueness. Further, we present boundary crossing identities between different process. We show, that if the problem has 6 or 4 group of symmetries then the first passage time density to any boundary can be explicitly represented in terms of the first passage time by Brownian motion or Bessel process. Many examples are presented to illustrate the method.

Full work available at URL: https://arxiv.org/abs/1807.03700

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zbMATH Keywords

hitting timediffusion processesLie symmetry groupsboundary-crossing probabilityfirst hitting time density

Mathematics Subject Classification ID

Diffusion processes (60J60) Applications of Lie groups to the sciences; explicit representations (22E70) Fokker-Planck equations (35Q84) Stochastic methods (Fokker-Planck, Langevin, etc.) applied to problems in time-dependent statistical mechanics (82C31)

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Cited In (3)

• Optimal investment and reinsurance strategies under 4/2 stochastic volatility model
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