Scaling Limits of Processes with Fast Nonlinear Mean Reversion
Probability
2019-06-07 v3
Abstract
We derive scaling limits for integral functionals of It\^o processes with fast nonlinear mean-reversion speed. We show that in these limits, the fast mean-reverting process is "averaged out" by integrating against its invariant measure. These convergence results hold uniformly in probability and, under mild integrability conditions, also in . They are a crucial building block for the analysis of portfolio choice models with small superlinear transaction costs, carried out in the companion paper of the present study.
Cite
@article{arxiv.1710.11202,
title = {Scaling Limits of Processes with Fast Nonlinear Mean Reversion},
author = {Thomas Cayé and Martin Herdegen and Johannes Muhle-Karbe},
journal= {arXiv preprint arXiv:1710.11202},
year = {2019}
}
Comments
37 pages, no figure