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199
On The Distribution And Asymptotic Results For Exponential Functionals Of Lévy Processes
, 1997
"... The aim of this note is to study the distribution and the asymptotic behavior of the exponential functional A t := R t 0 e s ds, where ( s ; s 0) denotes a L'evy process. When A1 ! 1, we show that in most cases, the law of A1 is a solution of an integrodifferential equation ; moreover, ..."
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Cited by 115 (11 self)
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The aim of this note is to study the distribution and the asymptotic behavior of the exponential functional A t := R t 0 e s ds, where ( s ; s 0) denotes a L'evy process. When A1 ! 1, we show that in most cases, the law of A1 is a solution of an integrodifferential equation ; moreover, this law is characterized by its integral moments. When the process is asymptotically ffstable, we prove that t \Gamma1=ff log A t converges in law, as t !1, to the supremum of an ffstable L'evy process ; in particular, if E [ 1 ] ? 0, then ff = 1 and (1=t) log A t converges almost surely to E [ 1 ]. Eventually, we use Girsanov's transform to give the explicit behavior of E \Theta (a +A t ()) \Gamma1 as t ! 1, where a is a constant, and deduce from this the rate of decay of the tail of the distribution of the maximum of a diffusion process in a random L'evy environment.
Exponential functionals of Lévy processes
 Probabilty Surveys
, 2005
"... Abstract: This text surveys properties and applications of the exponential functional ∫ t exp(−ξs)ds of realvalued Lévy processes ξ = (ξt, t ≥ 0). 0 ..."
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Cited by 75 (6 self)
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Abstract: This text surveys properties and applications of the exponential functional ∫ t exp(−ξs)ds of realvalued Lévy processes ξ = (ξt, t ≥ 0). 0
A Survey and Some Generalizations of Bessel Processes
 Bernoulli
, 1999
"... Bessel processes play an important role in financial mathematics because of their strong relation to financial processes like geometric Brownian motion or CIR processes. We are interested in the first time Bessel processes and more generally, radial OrnsteinUhlenbeck processes hit a given barrier. ..."
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Cited by 66 (1 self)
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Bessel processes play an important role in financial mathematics because of their strong relation to financial processes like geometric Brownian motion or CIR processes. We are interested in the first time Bessel processes and more generally, radial OrnsteinUhlenbeck processes hit a given barrier. We give explicit expressions of the Laplace transforms of first hitting times by (squared) radial OrnsteinUhlenbeck processes, i. e., CIR processes. As a natural extension we study squared Bessel processes and squared OrnsteinUhlenbeck processes with negative dimensions or negative starting points and derive their properties. Keywords: First hitting times; CIR processes; Bessel processes; radial Ornstein Uhlenbeck processes; Bessel processes with negative dimensions 1 Introduction Bessel processes have come to play a distinguished role in financial mathematics for at least two reasons, which have a lot to do with the models being usually considered. One of these models is the CoxI...
Tail asymptotics for exponential functionals of Lévy processes
 Stochastic Processes and their Applications 116 (2), 156–177.s and Economics 46 (2010) 362–370
, 2006
"... Motivated by recent studies in financial mathematics and other areas, we investigate the exponential functional Z = 0 e−X(t)dt of a Lévy process X(t), t ≥ 0. In particular, we investigate its tail asymptotics. We show that, depending on the right tail of X(1), the tail behavior of Z is exponential ..."
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Cited by 58 (5 self)
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Motivated by recent studies in financial mathematics and other areas, we investigate the exponential functional Z = 0 e−X(t)dt of a Lévy process X(t), t ≥ 0. In particular, we investigate its tail asymptotics. We show that, depending on the right tail of X(1), the tail behavior of Z is exponential, Pareto, or extremely heavytailed.
Arbitrage possibilities in Bessel processes and their relations to local martingales. Probability Theory and Related Fields 102
, 1995
"... Abstract. We show that, if we allow general admissible integrands as trading strategies, the three dimensional Bessel process, Bes3, admits arbitrage possibilities. This is in contrast with the fact that the inverse process is a local martingale and hence is arbitrage free. This leads to some econom ..."
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Cited by 57 (2 self)
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Abstract. We show that, if we allow general admissible integrands as trading strategies, the three dimensional Bessel process, Bes3, admits arbitrage possibilities. This is in contrast with the fact that the inverse process is a local martingale and hence is arbitrage free. This leads to some economic interpretation for the analysis of the property of arbitrage in foreign exchange rates. This notion (relative to general admissible integrands) does depend on the fact, which ofthe two currencies under consideration is chosen as numeraire. The results rely on a general construction of strictly positive local martingales. The construction is related to the Follmer measure of a positive supermartingale. Introduction. In our paper DelbaenSchachermayer [DS1], we showed that the inverse of the Bes 3 process, an example of a strict local martingale, doesn't allow arbitrage possibilities. In the present paper we investigate the Bes 3 process itself. The methods
Pricing of American PathDependent Contingent Claims
, 1994
"... We consider the problem of pricing pathdependent contingent claims. Classically, this problem can be cast into the BlackScholes valuation framework through inclusion of the pathdependent variables into the state space. This leads to solving a degenerate advectiondiffusion Partial Differential Eq ..."
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Cited by 53 (1 self)
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We consider the problem of pricing pathdependent contingent claims. Classically, this problem can be cast into the BlackScholes valuation framework through inclusion of the pathdependent variables into the state space. This leads to solving a degenerate advectiondiffusion Partial Differential Equation (PDE). Standard Finite Difference (FD) methods are known to be inadequate for solving such degenerate PDE. Hence, pathdependent European claims are typically priced through MonteCarlo simulation. To date, there is no numerical method for pricing pathdependent American claims. We first establish necessary and sufficient conditions amenable to a Lie algebraic characterization, under which degenerate diffusions can be reduced to lowerdimensional nondegenerate diffusions on a submanifold of the underlying asset space. We apply these results to pathdependent options. Then, we describe a new numerical technique, called Forward Shooting Grid (FSG) method, that efficiently copes with de...
Equivalent and absolutely continuous measure changes for jumpdiffusion processes” to appear in the Annals of Applied Probability
"... We provide explicit sufficient conditions for absolute continuity and equivalence between the distributions of two jumpdiffusion processes that can explode and be killed by a potential. ..."
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Cited by 35 (3 self)
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We provide explicit sufficient conditions for absolute continuity and equivalence between the distributions of two jumpdiffusion processes that can explode and be killed by a potential.
Spectral Expansions for Asian (Average Price) Options
, 2004
"... Arithmetic Asian or average price options deliver payoffs based on the average underlying price over a prespecified time period. Asian options are an important family of derivative contracts with a wide variety of applications in currency, equity, interest rate, commodity, energy, and insurance mark ..."
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Cited by 32 (4 self)
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Arithmetic Asian or average price options deliver payoffs based on the average underlying price over a prespecified time period. Asian options are an important family of derivative contracts with a wide variety of applications in currency, equity, interest rate, commodity, energy, and insurance markets. We derive two analytical formulas for the value of the continuously sampled arithmetic Asian option when the underlying asset price follows geometric Brownian motion. We use an identity in law between the integral of geometric Brownian motion over a finite time interval 0 t and the state at time t of a onedimensional diffusion process with affine drift and linear diffusion and express Asian option values in terms of spectral expansions associated with the diffusion infinitesimal generator. The first formula is an infinite series of terms involving Whittaker functions M and W. The second formula is a single real integral of an expression involving Whittaker function W plus (for some parameter values) a finite number of additional terms involving incomplete gamma functions and Laguerre polynomials. The two formulas allow accurate computation of continuously sampled arithmetic Asian option prices.
Levy Integrals and the Stationarity of generalised OrnsteinUhlenbeck processes
"... The generalised OrnsteinUhlenbeck process constructed from a bivariate Lévy process (ξt, ηt)t≥0 is defined as Vt = e −ξt ( ∫ t ..."
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Cited by 28 (12 self)
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The generalised OrnsteinUhlenbeck process constructed from a bivariate Lévy process (ξt, ηt)t≥0 is defined as Vt = e −ξt ( ∫ t
Note of option pricing for constant elasticity of variance model
 AsiaPacific Financial Markets
"... Abstract: We study the arbitrage free option pricing problem for constant elasticity of variance (CEV) model. To treat the stochastic aspect of the CEV model, we direct attention to the relationship between the CEV model and squared Bessel processes. Then we show the existence of a unique equivalent ..."
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Cited by 27 (0 self)
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Abstract: We study the arbitrage free option pricing problem for constant elasticity of variance (CEV) model. To treat the stochastic aspect of the CEV model, we direct attention to the relationship between the CEV model and squared Bessel processes. Then we show the existence of a unique equivalent martingale measure and derive the Cox’s arbitrage free option pricing formula through the properties of squared Bessel processes. Finally we show that the CEV model admits arbitrage opportunities when it is conditioned to be strictly positive.