Bessel bridges decomposition with varying dimension. Applications to finance
We consider a class of stochastic processes containing the classical and well-studied class of Squared Bessel processes. Our model, however, allows the dimension be a function of the time. We first give some classical results in a larger context where a time-varying drift term can be added. Then in the non-drifted case we extend many results already proven in the case of classical Bessel processes to our context. Our deepest result is a decomposition of the Bridge process associated to this generalized squared Bessel process, much similar to the much celebrated result of J. Pitman and M. Yor. On a more practical point of view, we give a methodology to compute the Laplace transform of additive functionals of our process and the associated bridge. This permits in particular to get directly access to the joint distribution of the value at t of the process and its integral. We finally give some financial applications to illustrate the panel of applications of our results.
|Date of creation:||03 May 2012|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00694126|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Griselda Deelstra & Freddy Delbaen, 1995. "Long-term returns in stochastic interest rate models," ULB Institutional Repository 2013/7578, ULB -- Universite Libre de Bruxelles.
- Deelstra, G. & Delbaen, F., 1995. "Long-term returns in stochastic interest rate models," Insurance: Mathematics and Economics, Elsevier, vol. 17(2), pages 163-169, October.
- Paul Glasserman & Kyoung-Kuk Kim, 2011. "Gamma expansion of the Heston stochastic volatility model," Finance and Stochastics, Springer, vol. 15(2), pages 267-296, June.
- Griselda Deelstra & Freddy Delbaen, 1995. "Long-term returns in stochastic interest rate models: convergence in law," ULB Institutional Repository 2013/7580, ULB -- Universite Libre de Bruxelles.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00694126. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.