×

zbMATH — the first resource for mathematics

Density of skew Brownian motion and its functionals with application in finance. (English) Zbl 1411.91555
Summary: We derive the joint density of a skew Brownian motion, its last visit to the origin, its local and occupation times. The result enables us to obtain explicit analytical formulas for pricing European options under both a two-valued local volatility model and a displaced diffusion model with constrained volatility.

MSC:
91G20 Derivative securities (option pricing, hedging, etc.)
60J70 Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.)
60J65 Brownian motion
PDF BibTeX XML Cite
Full Text: DOI arXiv