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On the Wiener–Hopf factorization for Lévy processes with bounded positive jumps

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  • Kuznetsov, A.
  • Peng, X.

Abstract

We study the Wiener–Hopf factorization for Lévy processes with bounded positive jumps and arbitrary negative jumps. We prove that the positive Wiener–Hopf factor can be expressed as an infinite product involving solutions to the equation ψ(z)=q, where ψ is the Laplace exponent. Under additional regularity assumptions on the Lévy measure we obtain an asymptotic expression for these solutions. When the process is spectrally negative with bounded jumps, we derive a series representation for the scale function. In order to illustrate possible applications, we discuss the implementation of numerical algorithms and present the results of several numerical experiments.

Suggested Citation

  • Kuznetsov, A. & Peng, X., 2012. "On the Wiener–Hopf factorization for Lévy processes with bounded positive jumps," Stochastic Processes and their Applications, Elsevier, vol. 122(7), pages 2610-2638.
    • Handle: RePEc:eee:spapps:v:122:y:2012:i:7:p:2610-2638
    DOI: 10.1016/j.spa.2012.04.014
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    1. Marc Jeannin & Martijn Pistorius, 2010. "A transform approach to compute prices and Greeks of barrier options driven by a class of Levy processes," Quantitative Finance, Taylor & Francis Journals, vol. 10(6), pages 629-644.
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    5. Fourati, Sonia, 2012. "Explicit solutions of the exit problem for a class of Lévy processes; applications to the pricing of double-barrier options," Stochastic Processes and their Applications, Elsevier, vol. 122(3), pages 1034-1067.
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    Cited by:

    1. Lan Wu & Jiang Zhou & Shuang Yu, 2017. "Occupation Times of General Lévy Processes," Journal of Theoretical Probability, Springer, vol. 30(4), pages 1565-1604, December.

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