Infinitesimal generators for two-dimensional Lévy process-driven hypothesis testing

Michael Roberts () and Indranil SenGupta ()
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Michael Roberts: North Dakota State University
Indranil SenGupta: North Dakota State University

Annals of Finance, 2020, vol. 16, issue 1, No 4, 139 pages

Abstract: Abstract In this paper, we present the testing of four hypotheses on two streams of observations that are driven by Lévy processes. This is applicable for sequential decision making on the state of two-sensor systems. In one case, each sensor receives or does not receive a signal obstructed by noise. In another, each sensor receives data driven by Lévy processes with large or small jumps. In either case, these give rise to four possibilities. Infinitesimal generators are presented and analyzed. Bounds for infinitesimal generators in terms of super-solutions and sub-solutions are computed. An application of this procedure for stochastic model is also presented in relation to the financial market.

Keywords: Lévy process; Infinitesimal generator; Hypothesis tests; Viscosity solution; Oil price (search for similar items in EconPapers)
JEL-codes: C12 C13 C62 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:annfin:v:16:y:2020:i:1:d:10.1007_s10436-019-00355-y

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DOI: 10.1007/s10436-019-00355-y

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