2016/01/18 by Thomas Deschatre, Deschatre, Thomas · 1 citation
Decision Sciences · Economics, Econometrics and Finance · Mathematics · #FOS: Mathematics #Financial Risk and Volatility Modeling #Probability (math.PR) #Probability and Risk Models #Stochastic processes and financial applications #math.PR
paper · pdf · doi:10.48550/arxiv.1601.04546
openalex publication_date 2016/01/18 · arxiv created 2021/01/08 · arxiv updated 2021/01/11 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We propose new copulae to model the dependence between two Brownian motions and to control the distribution of their difference. Our approach is based on the copula between the Brownian motion and its reflection. We show that the class of admissible copulae for the Brownian motions are not limited to the class of Gaussian copulae and that it also contains asymmetric copulae. These copulae allow for the survival function of the difference between two Brownian motions to have higher value in the right tail than in the Gaussian copula case. Considering two Brownian motions Bt1 and Bt2, the main result is that the range of possible values for ℙ(Bt1-B2t ≥ η) with η> 0 is the same for Markovian pairs and all pairs of Brownian motions, that is [0,2Φ((-η)/(2√(t)))] with Φ being the cumulative distribution function of a standard Gaussian random variable.