Revisiting Feller Diffusion: Derivation and Simulation

2019/05/26 by Munasinghe, Ranjiva, Kanthan, Leslie, Kossinna, Pathum
#FOS: Economics and business #FOS: Mathematics #Mathematical Finance (q-fin.MF) #Probability (math.PR)

paper · doi:10.48550/arxiv.1905.10737

Abstract

We propose a simpler derivation of the probability density function of Feller Diffusion using the Fourier Transform and solving the resulting equation via the Method of Characteristics. We also discuss simulation algorithms and confirm key properties related to hitting time probabilities via the simulation.

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