Linear and non-linear boundary crossing probabilities for Brownian motion and related processes
Date
2010-12
Authors
Wu, Tung-Lung Jr
Journal Title
Journal ISSN
Volume Title
Publisher
Applied Probability Trust - Journal of Applied Probability
Abstract
We propose a simple and general method to obtain the boundary crossing probability
for Brownian motion. This method can be easily extended to higher dimensional
of Brownian motion. It also covers certain classes of stochastic processes associated
with Brownian motion. The basic idea of the method is based on being able to
construct a nite Markov chain such that the boundary crossing probability of
Brownian motion is obtained as the limiting probability of the nite Markov chain
entering a set of absorbing states induced by the boundary. Numerical results are
given to illustrate our method.
Description
Keywords
boundary crossing probabilities, Brownian motion, first passage time, finite Markov chain imbedding, diffusion processes, absorption probability, transition probability matrices, random walks
Citation
Fu, J. C. and Wu, T.-L. (2010). Linear and nonlinear boundary crossing probabilities for Brownian motion and related processes. J. Appl. Prob., 47, 1058-1071.