Occupation times, drawdowns, and drawups for one-dimensional regular diffusions
Probability
2016-03-11 v3
Abstract
The drawdown process of an one-dimensional regular diffusion process is given by reflected at its running maximum. The drawup process is given by reflected at its running minimum. We calculate the probability that a drawdown proceeds a drawup in an exponential time-horizon. We then study the law of the occupation times of the drawdown process and the drawup process. These results are applied to address problems in risk analysis and for option pricing of the drawdown process. Finally, we present examples of Brownian motion with drift and three-dimensional Bessel processes, where we prove an identity in law.
Cite
@article{arxiv.1304.8093,
title = {Occupation times, drawdowns, and drawups for one-dimensional regular diffusions},
author = {Hongzhong Zhang},
journal= {arXiv preprint arXiv:1304.8093},
year = {2016}
}
Comments
24 pages. Advances in Applied Probability, forthcoming 2015. Corrected several typos