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The distribution of refracted Lévy processes with jumps having rational Laplace transforms

  • Jiang Zhou (a1) and Lan Wu (a1)


We consider a refracted jump diffusion process having two-sided jumps with rational Laplace transforms. For such a process, by applying a straightforward but interesting approach, we derive formulae for the Laplace transform of its distribution. Our formulae are presented in an attractive form and the approach is novel. In particular, the idea in the application of an approximating procedure is remarkable. In addition, the results are used to price variable annuities with state-dependent fees.


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* Postal address: School of Mathematical Sciences, Peking University, Beijing, 100871, P. R. China.
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Journal of Applied Probability
  • ISSN: 0021-9002
  • EISSN: 1475-6072
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