The Hitting Time Density for a Reflected Brownian Motion

Authors:
Qin Hu;Yongjin Wang;Xuewei Yang
Affiliations:
School of Mathematical Sciences, TEDA Institute of Computational Finance, Nankai University, Tianjin, People's Republic of China 300071;School of Business, Nankai University, Tianjin, People's Republic of China 300071;School of Mathematical Sciences, TEDA Institute of Computational Finance, Nankai University, Tianjin, People's Republic of China 300071
Venue:
Computational Economics
Year:
2012

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Abstract

Reflected Brownian motion has been played an important role in economics, finance, queueing and many other fields. In this paper, we present the explicit spectral representation for the hitting time density of the reflected Brownian motion with two-sided barriers, and give some detailed analysis on the computational issues. Numerical analysis reveals that the spectral representation is more appealing than the method of numerical Laplace inversion. Two applications are included at the end of the paper.