English

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 Sp\mathcal{S}^p. 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.

Keywords

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

R2 v1 2026-06-22T22:30:27.102Z