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Linear and Nonlinear Boundary Crossing Probabilities for Brownian Motion and Related Processes

  • James C. Fu (a1) and Tung-Lung Wu (a1)

Abstract

We propose a new method to obtain the boundary crossing probabilities or the first passage time distribution for linear and nonlinear boundaries for Brownian motion. The method also covers certain classes of stochastic processes associated with Brownian motion. The basic idea of the method is based on being able to construct a finite Markov chain, and the boundary crossing probability of Brownian motion is cast as the limiting probability of the finite Markov chain entering a set of absorbing states induced by the boundaries. Error bounds are obtained. Numerical results for various types of boundary studied in the literature are provided in order to illustrate our method.

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Copyright

Corresponding author

Postal address: Department of Statistics, University of Manitoba, Winnipeg, MB, R3T 2N2, Canada.
∗∗ Email address: umwu48@cc.umanitoba.ca

References

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Linear and Nonlinear Boundary Crossing Probabilities for Brownian Motion and Related Processes

  • James C. Fu (a1) and Tung-Lung Wu (a1)

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