The first passage time (FPT) problem for Brownian motion has been extensively studied
in the literature. In particular, many incarnations of integral equations which link the density of the hitting time to the equation for the boundary itself have appeared. Most interestingly, Peskir (2002b) demonstrates that a master integral equation can be used to generate a countable number of new integrals via its differentiation or integration. In this thesis, we generalize Peskir's results and provide a more powerful unifying framework for generating integral equations through a new class of martingales. We obtain a continuum of new Volterra type equations and prove uniqueness for a subclass. The uniqueness result is
then employed to demonstrate how certain functional transforms of the boundary affect the density function. Furthermore, we generalize a class of Fredholm integral equations and show its fundamental
connection to the new class of Volterra equations. The Fredholm equations are then
shown to provide a unified approach for computing the FPT distribution for linear, square root and quadratic boundaries. In addition, through the Fredholm equations, we analyze a polynomial expansion of the FPT density and employ a regularization method to solve for the coefficients. Moreover, the Volterra and Fredholm equations help us to examine a modification of the classical FPT under which we randomize, independently, the starting point of the Brownian motion. This randomized problem seeks the distribution of the starting point and takes the boundary and the (unconditional) FPT distribution as inputs. We show the existence
and uniqueness of this random variable and solve the problem analytically for the linear
boundary. The randomization technique is then drawn on to provide a structural framework
for modeling mortality. We motivate the model and its natural inducement of 'risk-neutral'
measures to price mortality linked financial products.
Finally, we address the inverse FPT problem and show that in the case of the scale family
of distributions, it is reducible to nding a single, base boundary. This result was applied
to the exponential and uniform distributions to obtain analytical approximations of their
corresponding base boundaries and, through the scaling property, for a general boundary.
| Identifer | oai:union.ndltd.org:TORONTO/oai:tspace.library.utoronto.ca:1807/19240 |
| Date | 03 March 2010 |
| Creators | Valov, Angel |
| Contributors | Jaimungal, Sebastian, Alexander, Kreinin |
| Source Sets | University of Toronto |
| Language | en_ca |
| Detected Language | English |
| Type | Thesis |
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