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Bounded Brownian Motion

Peter Carr ()
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Peter Carr: Department of Finance and Risk Engineering, Tandon School of Engineering, NYU, 12 MetroTech Center, Brooklyn, NY 11201, USA

Risks, 2017, vol. 5, issue 4, 1-11

Abstract: Diffusions are widely used in finance due to their tractability. Driftless diffusions are needed to describe ratios of asset prices under a martingale measure. We provide a simple example of a tractable driftless diffusion which also has a bounded state space.

Keywords: standard Brownian motion; Brownian martingale; diffusion coefficient (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 M2 M4 K2 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:gam:jrisks:v:5:y:2017:i:4:p:61-:d:119375