 Geometric Brownian motion with affine drift and its time-integralRunhuan Feng, Pingping Jiang and Hans Volkmer Applied Mathematics and Computation, 2021, vol. 395, issue C Abstract: The joint distribution of a geometric Brownian motion and its time-integral was derived in a seminal paper by Yor (1992) using Lamperti’s transformation, leading to explicit solutions in terms of modified Bessel functions. In this paper, we revisit this classic result using the simple Laplace transform approach in connection to the Heun differential equation. We extend the methodology to the geometric Brownian motion with affine drift and show that the joint distribution of this process and its time-integral can be determined by a doubly-confluent Heun equation. Furthermore, the joint Laplace transform of the process and its time-integral is derived from the asymptotics of the solutions. In addition, we provide an application by using the results for the asymptotics of the double-confluent Heun equation in pricing Asian options. Numerical results show the accuracy and efficiency of this new method. Keywords: Doubly-confluent Heun equation; Deometric Brownian motion with affine drift; Lamperti’s transformation; Asymptotics; Boundary value problem (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:apmaco:v:395:y:2021:i:c:s0096300320308274 DOI: 10.1016/j.amc.2020.125874 Access Statistics for this article Applied Mathematics and Computation is currently edited by Theodore Simos More articles in Applied Mathematics and Computation from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.