Book•
Lévy processes and infinitely divisible distributions
01 Jan 2013-
TL;DR: In this paper, the authors consider the distributional properties of Levy processes and propose a potential theory for Levy processes, which is based on the Wiener-Hopf factorization.
Abstract: Preface to the revised edition Remarks on notation 1. Basic examples 2. Characterization and existence 3. Stable processes and their extensions 4. The Levy-Ito decomposition of sample functions 5. Distributional properties of Levy processes 6. Subordination and density transformation 7. Recurrence and transience 8. Potential theory for Levy processes 9. Wiener-Hopf factorizations 10. More distributional properties Supplement Solutions to exercises References and author index Subject index.
Citations
More filters
TL;DR: An advanced Heath-Jarrow-Morton forward rate model driven by time-inhomogeneous Levy processes is presented in this paper, which is able to handle the recent development to multiple curves and negative interest rates.
Abstract: An advanced Heath–Jarrow–Morton forward rate model driven by time-inhomogeneous Levy processes is presented which is able to handle the recent development to multiple curves and negative interest r...
9 citations
Cites background from "Lévy processes and infinitely divis..."
...(2) Y 2 := (Ll+1, . . . , Ld)T = (−Zl+1, . . . ,−Zd)T, where Z := (Zl+1, . . . , Zd)T = −Y 2 is an Rd−l+ -valued Lévy process whose components are subordinators (see Sato 1999, definition 21.4)....
[...]
...(5.4) Note that this expression can be extended to complex numbers using assumption (EM) (cf. Sato 1999, theorem 25.17)....
[...]
...Let N be a normal inverse Gaussian Lévy motion with parameters α, β, δ, μ satisfying 0 ≤ |β| < α, δ > 0 and μ ∈ R (see e.g. Eberlein (2009)) and Z j be a Gamma process with parameters α j , β j > 0 for every j ∈ {1, 2, 3} (see e.g. Sato 1999)....
[...]
Posted Content•
TL;DR: In this article, the authors derived formulas for the probability distributions of the probability of a spectrally positive L\'evy process with infinite variation, and the joint distribution of a non-negative and interchangeable process with constant variation.
Abstract: In this article we derive formulas for the probability $P(\sup_{t\leq T} X(t)>u)$ $T>0$ and $P(\sup_{t u)$ where $X$ is a spectrally positive L\'evy process with infinite variation. The formulas are generalizations of the well-known Tak\'acs formulas for stochastic processes with non-negative and interchangeable increments. Moreover, we find the joint distribution of $\inf_{t\leq T} Y(t)$ and $Y(T)$ where $Y$ is a spectrally negative L\'evy process.
9 citations
TL;DR: A partial differential equation framework for option pricing where the underlying factors exhibit stochastic correlation, with an emphasis on computation is studied, leading to a novel computational asymptotic approach based on quadrature with a perturbed transition density.
Abstract: In this paper, we study a partial differential equation (PDE) framework for option pricing where the underlying factors exhibit stochastic correlation, with an emphasis on computation. We derive a multidimensional time-dependent PDE for the corresponding pricing problem and present a numerical PDE solution. We prove a stability result and study numerical issues regarding the boundary conditions used. Moreover, we develop and analyze an asymptotic analytical approximation to the solution, leading to a novel computational asymptotic approach based on quadrature with a perturbed transition density. Numerical results are presented to verify second order convergence of the numerical PDE solution and to demonstrate its agreement with the asymptotic approximation and Monte Carlo simulations. The effect of certain problem parameters on the PDE solution, as well as on the asymptotic approximation solution, is also studied.
9 citations
Additional excerpts
...18 of [36], it suffices to provide a similar bound for eEx,y,ρ ( eτ ,Yτ 1{max(Xτ ,Yτ )>Rlog} )...
[...]
...18 of [36] implies that for any γ > 0, C1(γ, σS1 , r, τ) = E [...
[...]
Posted Content•
TL;DR: This thesis investigates how to design large-scale systems in order to achieve the dual goal of operational efficiency and quality-of-service, by which it means that the system is highly occupied and hence efficiently utilizes the expensive resources, while at the same time, the level of service, experienced by customers, remains high.
Abstract: Stochastic service systems describe situations in which customers compete for service from scarce resources. Think of check-in lines at airports, waiting rooms in hospitals or queues in supermarkets, where the scarce resource is human manpower. Next to these traditional settings, resource sharing is also important in large-scale service systems such as the internet, wireless networks and cloud computing facilities. In these virtual environments, geographical conditions do not restrict the system size, paving the way for the emergence of large-scale resource sharing networks. This thesis investigates how to design large-scale systems in order to achieve the dual goal of operational efficiency and quality-of-service, by which we mean that the system is highly occupied and hence efficiently utilizes the expensive resources, while at the same time, the level of service, experienced by customers, remains high.
9 citations
TL;DR: In this paper, the authors used the backward parametrix method to prove the existence and regularity of the transition density associated to the solution process of a stable-like driven stochastic differential equation with Holder continuous coefficients.
Abstract: In this article, we use the backward parametrix method in order to prove the existence and regularity of the the transition density associated to the solution process of a stable-like driven stochastic differential equation (SDE) with Holder continuous coefficients. The method of proof uses the parametrix method on the Gaussian component of a subordinated Brownian motion. This analysis which can be generalized also provides a stochastic representation of the density which is potentially useful for other applications.Abbrevations: B: Brownian motion; V: α-stable-like subordinator independent of B; μ: Levy measure of the subordinator V; m(·): positive concave increasing function; ; δy(dx): Dirac measure with unit mass at ; ψ: Levy exponent of Z; q(M, x): Gaussian density with covariance matrix M and ; ϕ: a regular varying function; b: drift coefficient of X; σ: coefficient of associated with the driving Levy process Z ≔ BV; ζ: coefficient associated with the diffusion (if X is a jump diffusion proce...
9 citations
References
More filters
01 Jan 2014
TL;DR: In this article, Kloeden, P., Ombach, J., Cyganowski, S., Kostrikin, A. J., Reddy, J.A., Pokrovskii, A., Shafarevich, I.A.
Abstract: Algebra and Famous Inpossibilities Differential Systems Dumortier.: Qualitative Theory of Planar Jost, J.: Dynamical Systems. Examples of Complex Behaviour Jost, J.: Postmodern Analysis Jost, J.: Riemannian Geometry and Geometric Analysis Kac, V.; Cheung, P.: Quantum Calculus Kannan, R.; Krueger, C.K.: Advanced Analysis on the Real Line Kelly, P.; Matthews, G.: The NonEuclidean Hyperbolic Plane Kempf, G.: Complex Abelian Varieties and Theta Functions Kitchens, B. P.: Symbolic Dynamics Kloeden, P.; Ombach, J.; Cyganowski, S.: From Elementary Probability to Stochastic Differential Equations with MAPLE Kloeden, P. E.; Platen; E.; Schurz, H.: Numerical Solution of SDE Through Computer Experiments Kostrikin, A. I.: Introduction to Algebra Krasnoselskii, M.A.; Pokrovskii, A.V.: Systems with Hysteresis Kurzweil, H.; Stellmacher, B.: The Theory of Finite Groups. An Introduction Lang, S.: Introduction to Differentiable Manifolds Luecking, D.H., Rubel, L.A.: Complex Analysis. A Functional Analysis Approach Ma, Zhi-Ming; Roeckner, M.: Introduction to the Theory of (non-symmetric) Dirichlet Forms Mac Lane, S.; Moerdijk, I.: Sheaves in Geometry and Logic Marcus, D.A.: Number Fields Martinez, A.: An Introduction to Semiclassical and Microlocal Analysis Matoušek, J.: Using the Borsuk-Ulam Theorem Matsuki, K.: Introduction to the Mori Program Mazzola, G.; Milmeister G.; Weissman J.: Comprehensive Mathematics for Computer Scientists 1 Mazzola, G.; Milmeister G.; Weissman J.: Comprehensive Mathematics for Computer Scientists 2 Mc Carthy, P. J.: Introduction to Arithmetical Functions McCrimmon, K.: A Taste of Jordan Algebras Meyer, R.M.: Essential Mathematics for Applied Field Meyer-Nieberg, P.: Banach Lattices Mikosch, T.: Non-Life Insurance Mathematics Mines, R.; Richman, F.; Ruitenburg, W.: A Course in Constructive Algebra Moise, E. E.: Introductory Problem Courses in Analysis and Topology Montesinos-Amilibia, J.M.: Classical Tessellations and Three Manifolds Morris, P.: Introduction to Game Theory Nikulin, V.V.; Shafarevich, I. R.: Geometries and Groups Oden, J. J.; Reddy, J. N.: Variational Methods in Theoretical Mechanics Øksendal, B.: Stochastic Differential Equations Øksendal, B.; Sulem, A.: Applied Stochastic Control of Jump Diffusions Poizat, B.: A Course in Model Theory Polster, B.: A Geometrical Picture Book Porter, J. R.; Woods, R.G.: Extensions and Absolutes of Hausdorff Spaces Radjavi, H.; Rosenthal, P.: Simultaneous Triangularization Ramsay, A.; Richtmeyer, R.D.: Introduction to Hyperbolic Geometry Rees, E.G.: Notes on Geometry Reisel, R. B.: Elementary Theory of Metric Spaces Rey, W. J. J.: Introduction to Robust and Quasi-Robust Statistical Methods Ribenboim, P.: Classical Theory of Algebraic Numbers Rickart, C. E.: Natural Function Algebras Roger G.: Analysis II Rotman, J. J.: Galois Theory Jost, J.: Compact Riemann Surfaces Applications ́ Introductory Lectures on Fluctuations of Levy Processes with Kyprianou, A. : Rautenberg, W.; A Concise Introduction to Mathematical Logic Samelson, H.: Notes on Lie Algebras Schiff, J. L.: Normal Families Sengupta, J.K.: Optimal Decisions under Uncertainty Séroul, R.: Programming for Mathematicians Seydel, R.: Tools for Computational Finance Shafarevich, I. R.: Discourses on Algebra Shapiro, J. H.: Composition Operators and Classical Function Theory Simonnet, M.: Measures and Probabilities Smith, K. E.; Kahanpää, L.; Kekäläinen, P.; Traves, W.: An Invitation to Algebraic Geometry Smith, K.T.: Power Series from a Computational Point of View Smoryński, C.: Logical Number Theory I. An Introduction Stichtenoth, H.: Algebraic Function Fields and Codes Stillwell, J.: Geometry of Surfaces Stroock, D.W.: An Introduction to the Theory of Large Deviations Sunder, V. S.: An Invitation to von Neumann Algebras Tamme, G.: Introduction to Étale Cohomology Tondeur, P.: Foliations on Riemannian Manifolds Toth, G.: Finite Möbius Groups, Minimal Immersions of Spheres, and Moduli Verhulst, F.: Nonlinear Differential Equations and Dynamical Systems Wong, M.W.: Weyl Transforms Xambó-Descamps, S.: Block Error-Correcting Codes Zaanen, A.C.: Continuity, Integration and Fourier Theory Zhang, F.: Matrix Theory Zong, C.: Sphere Packings Zong, C.: Strange Phenomena in Convex and Discrete Geometry Zorich, V.A.: Mathematical Analysis I Zorich, V.A.: Mathematical Analysis II Rybakowski, K. P.: The Homotopy Index and Partial Differential Equations Sagan, H.: Space-Filling Curves Ruiz-Tolosa, J. R.; Castillo E.: From Vectors to Tensors Runde, V.: A Taste of Topology Rubel, L.A.: Entire and Meromorphic Functions Weintraub, S.H.: Galois Theory
401 citations
TL;DR: In this article, several definitions of the Riesz fractional Laplace operator in R^d have been studied, including singular integrals, semigroups of operators, Bochner's subordination, and harmonic extensions.
Abstract: This article reviews several definitions of the fractional Laplace operator (-Delta)^{alpha/2} (0 < alpha < 2) in R^d, also known as the Riesz fractional derivative operator, as an operator on Lebesgue spaces L^p, on the space C_0 of continuous functions vanishing at infinity and on the space C_{bu} of bounded uniformly continuous functions. Among these definitions are ones involving singular integrals, semigroups of operators, Bochner's subordination and harmonic extensions. We collect and extend known results in order to prove that all these definitions agree: on each of the function spaces considered, the corresponding operators have common domain and they coincide on that common domain.
372 citations
TL;DR: In this article, the authors give an up-to-date account of the theory and applications of scale functions for spectrally negative Levy processes, including the first extensive overview of how to work numerically with scale functions.
Abstract: The purpose of this review article is to give an up to date account of the theory and applications of scale functions for spectrally negative Levy processes. Our review also includes the first extensive overview of how to work numerically with scale functions. Aside from being well acquainted with the general theory of probability, the reader is assumed to have some elementary knowledge of Levy processes, in particular a reasonable understanding of the Levy–Khintchine formula and its relationship to the Levy–Ito decomposition. We shall also touch on more general topics such as excursion theory and semi-martingale calculus. However, wherever possible, we shall try to focus on key ideas taking a selective stance on the technical details. For the reader who is less familiar with some of the mathematical theories and techniques which are used at various points in this review, we note that all the necessary technical background can be found in the following texts on Levy processes; (Bertoin, Levy Processes (1996); Sato, Levy Processes and Infinitely Divisible Distributions (1999); Kyprianou, Introductory Lectures on Fluctuations of Levy Processes and Their Applications (2006); Doney, Fluctuation Theory for Levy Processes (2007)), Applebaum Levy Processes and Stochastic Calculus (2009).
288 citations
TL;DR: A closed formula for prices of perpetual American call options in terms of the overall supremum of the Lévy process, and a corresponding closed formulas for perpetual American put options involving the infimum of the after-mentioned process are obtained.
Abstract: Consider a model of a financial market with a stock driven by a Levy process and constant interest rate. A closed formula for prices of perpetual American call options in terms of the overall supremum of the Levy process, and a corresponding closed formula for perpetual American put options involving the infimum of the after-mentioned process are obtained. As a direct application of the previous results, a Black-Scholes type formula is given. Also as a consequence, simple explicit formulas for prices of call options are obtained for a Levy process with positive mixed-exponential and arbitrary negative jumps. In the case of put options, similar simple formulas are obtained under the condition of negative mixed-exponential and arbitrary positive jumps. Risk-neutral valuation is discussed and a simple jump-diffusion model is chosen to illustrate the results.
269 citations
01 May 2013
TL;DR: In this paper, the authors review work on extreme events, their causes and consequences, by a group of European and American researchers involved in a three-year project on these topics.
Abstract: We review work on extreme events, their causes and consequences, by a group of European and American researchers involved in a three-year project on these topics. The review covers theoretical aspects of time series analysis and of extreme value theory, as well as of the deterministic modeling of extreme events, via continuous and discrete dynamic models. The applications include climatic, seismic and socio-economic events, along with their prediction. Two important results refer to (i) the complementarity of spectral analysis of a time series in terms of the continuous and the discrete part of its power spectrum; and (ii) the need for coupled modeling of natural and socio-economic systems. Both these results have implications for the study and prediction of natural hazards and their human impacts.
166 citations