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Density symmetries ...
Density symmetries for a class of 2-D diffusions with applications to finance
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- Dareiotis, Konstantinos (författare)
- Max Planck Inst Math Sci, Inselstr 22, D-04103 Leipzig, Germany
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- Ekström, Erik, 1977- (författare)
- Uppsala universitet,Tillämpad matematik och statistik,Analys och sannolikhetsteori
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(creator_code:org_t)
- ELSEVIER SCIENCE BV, 2019
- 2019
- Engelska.
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Ingår i: Stochastic Processes and their Applications. - : ELSEVIER SCIENCE BV. - 0304-4149 .- 1879-209X. ; 129:2, s. 452-472
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Abstract
Ämnesord
Stäng
- We study densities of two-dimensional diffusion processes with one non-negative component. For such diffusions, the density may explode at the boundary, thus making a precise specification of the boundary condition in the corresponding forward Kolmogorov equation problematic. We overcome this by extending a classical symmetry result for densities of one-dimensional diffusions to our case, thereby reducing the study of forward equations with exploding boundary data to the study of a related backward equation with non-exploding boundary data. We also discuss applications of this symmetry for option pricing in stochastic volatility models and in stochastic short rate models. (C) 2018 Elsevier B.V. All rights reserved.
Ämnesord
- NATURVETENSKAP -- Matematik -- Sannolikhetsteori och statistik (hsv//swe)
- NATURAL SCIENCES -- Mathematics -- Probability Theory and Statistics (hsv//eng)
Publikations- och innehållstyp
- ref (ämneskategori)
- art (ämneskategori)
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