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A New Approach to the Computation of First Passage Time Distribution for Brownian Motion

This thesis consists of two novel contributions to the computation of first passage time distribution for Brownian motion. First, we extend the known formula for boundary crossing probabilities for Brownian motion to the discontinuous piecewise linear boundary. Second, we derive explicit formula for the first passage time density of Brownian motion crossing piecewise linear boundary. Further, we demonstrate how to approximate the boundary crossing probabilities and density for general nonlinear boundaries. Moreover, we use Monte Carlo simulation method and develop algorithms for the numerical computation. This method allows one to assess the accuracy of the numerical approximation. Our approach can be further extended to compute two-sided boundary crossing probabilities.

Identiferoai:union.ndltd.org:MANITOBA/oai:mspace.lib.umanitoba.ca:1993/23831
Date20 August 2014
CreatorsJin, Zhiyong
ContributorsWang, Liqun (Statistics), Johnson, Brad (Statistics) Paseka, Alex (Finance)
Source SetsUniversity of Manitoba Canada
Detected LanguageEnglish

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