Bounds on the expected value of maximum loss of fractional Brownian motion

Ceren Vardar-Acar and Hatice Bulut

Statistics & Probability Letters, 2015, vol. 104, issue C, 117-122

Abstract: It has been theoretically proven through present study that the expected value of maximum loss of fractional Brownian motion up to fixed time t with Hurst parameter [1/2,1) is bounded above by tHπ2 and below by tH2. These new bounds provide improvement on those bounds which have been previously derived in the literature. In order to search for closer bounds, numerical study is also performed through discretization method and multivariate Gaussian variables have been examined. The simulated values of the expected value of maximum loss of fractional Brownian motion have been provided through the use of Cholesky decomposition. As a consequence of the simulation study, it has been observed that as the Hurst parameter increases, the values of the expected maximum loss of fractional Brownian motion decreases.

Keywords: Cholesky decomposition; Hurst parameter; Fractional Brownian motion; Maximum loss; Sudakov–Fernique inequality (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.spl.2015.05.001

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