DENSITY OF SKEW BROWNIAN MOTION AND ITS FUNCTIONALS WITH APPLICATION IN FINANCE
Copyright policy )DENSITY OF SKEW BROWNIAN MOTION AND ITS FUNCTIONALS WITH APPLICATION IN FINANCE
AbstractWe derive the joint density of a Skew Brownian motion, its last visit to the origin, its local and occupation times. The result enables us to obtain explicit analytical formulas for pricing European options under both a two‐valued local volatility model and a displaced diffusion model with constrained volatility.
skew Brownian motion, Probability (math.PR), displaced diffusion, Mathematical Finance (q-fin.MF), occupation time, FOS: Economics and business, Derivative securities (option pricing, hedging, etc.), local time, Quantitative Finance - Mathematical Finance, simple random walk, FOS: Mathematics, Brownian motion, local volatility model, option pricing, Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.), Mathematics - Probability
skew Brownian motion, Probability (math.PR), displaced diffusion, Mathematical Finance (q-fin.MF), occupation time, FOS: Economics and business, Derivative securities (option pricing, hedging, etc.), local time, Quantitative Finance - Mathematical Finance, simple random walk, FOS: Mathematics, Brownian motion, local volatility model, option pricing, Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.), Mathematics - Probability
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