First Passage Time for Brownian Motion and Piecewise Linear Boundaries

Zhiyong Jin and Liqun Wang
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Zhiyong Jin: University of Manitoba

Methodology and Computing in Applied Probability, 2017, vol. 19, issue 1, 237-253

Abstract: Abstract We propose a new approach to calculating the first passage time densities for Brownian motion crossing piecewise linear boundaries which can be discontinuous. Using this approach we obtain explicit formulas for the first passage densities and show that they are continuously differentiable except at the break points of the boundaries. Furthermore, these formulas can be used to approximate the first passage time distributions for general nonlinear boundaries. The numerical computation can be easily done by using the Monte Carlo integration, which is straightforward to implement. Some numerical examples are presented for illustration. This approach can be further extended to compute two-sided boundary crossing distributions.

Keywords: Boundary crossing density; Brownian motion; First hitting time; First passage time; Curved boundary; Primary 60J65; 60J75; Secondary 60J60; 60J70 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11009-015-9475-2

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