2010/12/01 by Alexey Kuznetsov, A. Kuznetsov · 1 citation
Economics, Econometrics and Finance · Decision Sciences · Mathematics · #Stochastic processes and financial applications #Probability and Risk Models #Nonlinear Differential Equations Analysis
paper · pdf · doi:10.1239/jap/1294170516
In this paper we study the Wiener-Hopf factorization for a class of Lévy processes with double-sided jumps, characterized by the fact that the density of the Lévy measure is given by an infinite series of exponential functions with positive coefficients. We express the Wiener-Hopf factors as infinite products over roots of a certain transcendental equation, and provide a series representation for the distribution of the supremum/infimum process evaluated at an independent exponential time. We also introduce five eight-parameter families of Lévy processes, defined by the fact that the density of the Lévy measure is a (fractional) derivative of the theta function, and we show that these processes can have a wide range of behavior of small jumps. These families of processes are of particular interest for applications, since the characteristic exponent has a simple expression, which allows efficient numerical computation of the Wiener-Hopf factors and distributions of various functionals of the process.