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Computing the First Passage Time Density of a Time-Dependent Urnstein-Uhlenbeck Process to a Moving Boundary


C.F. Lo


Chinese University of Hong Kong (CUHK)

C. H. Hui


Hong Kong Monetary Authority - Research Department

Applied Mathematics Letters, Vol. 19, pp. 1399-1405, 2006

Abstract:     
In this paper we use the method of images to derive the closed-form formula for the first passage time density of a timed-dependent Ornstein-Uhlenbeck process to a parametric class of moving boundaries. The results are then applied to develop a simple, efficient and systematic approximation scheme to compute tight upper and lower bounds of the first passage time density through a fixed boundary.

Number of Pages in PDF File: 7

Keywords: Ornstein-Uhlenbeck process, Fokker-Planck equation, First passage time density, Method of images, Moving boundary

JEL Classification: C60, G13

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Date posted: August 27, 2007  

Suggested Citation

Lo, C.F. and Hui, C. H., Computing the First Passage Time Density of a Time-Dependent Urnstein-Uhlenbeck Process to a Moving Boundary. Applied Mathematics Letters, Vol. 19, pp. 1399-1405, 2006. Available at SSRN: http://ssrn.com/abstract=1007155

Contact Information

Chi Fai Lo (Contact Author)
Chinese University of Hong Kong (CUHK) ( email )
Department of Physics
Shatin, N.T., Hong Kong
China
Cho-Hoi Hui
Hong Kong Monetary Authority - Research Department ( email )
Hong Kong
China
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