English

Path Diffusion, Part I

Mathematical Finance 2014-06-03 v1

Abstract

This paper investigates the position (state) distribution of the single step binomial (multi-nomial) process on a discrete state / time grid under the assumption that the velocity process rather than the state process is Markovian. In this model the particle follows a simple multi-step process in velocity space which also preserves the proper state equation of motion. Many numerical numerical examples of this process are provided. For a smaller grid the probability construction converges into a correlated set of probabilities of hyperbolic functions for each velocity at each state point. It is shown that the two dimensional process can be transformed into a Telegraph equation and via transformation into a Klein-Gordon equation if the transition rates are constant. In the last Section there is an example of multi-dimensional hyperbolic partial differential equation whose numerical average satisfies Newton's equation. There is also a momentum measure provided both for the two-dimensional case as for the multi-dimensional rate matrix.

Cite

@article{arxiv.1406.0077,
  title  = {Path Diffusion, Part I},
  author = {Johan GB Beumee and Chris Cormack and Peyman Khorsand and Manish Patel},
  journal= {arXiv preprint arXiv:1406.0077},
  year   = {2014}
}

Comments

28 pages, 10 Figures

R2 v1 2026-06-22T04:27:33.576Z