A correction note on the first passage time of an Ornstein-Uhlenbeck process to a boundary

O. Renault (), Olivier Scaillet and B. Leblanc ()
Additional contact information
O. Renault: Département des Sciences Economiques, Université Catholique de Louvain, 3 Place Montesquieu, B-1348 Louvain-la-Neuve, Belgique
B. Leblanc: Banque Nationale de Paris, BFI-MC, 13, rue Lafayette, F-75009 Paris, France

Finance and Stochastics, 2000, vol. 4, issue 1, 109-111

Abstract: This paper provides the derivation of the hitting time density of an Ornstein-Uhlenbeck process to a flat boundary. The derivation relies on a change of measure approach and delivers an explicit formula. This formula is an amended expression of the result given in Leblanc and Scaillet (1998). It corresponds to the formula given by a time substitution approach when the boundary level coincides with the mean of the invariant measure. It can for example be used to price digital up-and-in credit spread options when the logarithm of the credit spread is assumed to follow an Ornstein-Uhlenbeck process.

Keywords: Hitting time; Ornstein-Uhlenbeck process; path dependent option (search for similar items in EconPapers)
JEL-codes: E43 G13 (search for similar items in EconPapers)
Date: 1999-10-29
Note: received: February 1999; final version received: April 1999
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.de/link/service/journals/00780/papers/0004001/00040109.pdf (application/pdf)
Access to the full text of the articles in this series is restricted

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:finsto:v:4:y:2000:i:1:p:109-111

Ordering information: This journal article can be ordered from
http://www.springer. ... ance/journal/780/PS2

Access Statistics for this article

Finance and Stochastics is currently edited by M. Schweizer

More articles in Finance and Stochastics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().