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Large deviations of conditioned diffusions and applications

Author

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  • Baldi, Paolo
  • Caramellino, Lucia
  • Rossi, Maurizia

Abstract

We provide Large Deviation estimates for the bridge of a d-dimensional general diffusion process as the conditioning time tends to 0 and show that these results can be applied to the evaluation of the asymptotics of its exit time probabilities.

Suggested Citation

  • Baldi, Paolo & Caramellino, Lucia & Rossi, Maurizia, 2020. "Large deviations of conditioned diffusions and applications," Stochastic Processes and their Applications, Elsevier, vol. 130(3), pages 1289-1308.
    • Handle: RePEc:eee:spapps:v:130:y:2020:i:3:p:1289-1308
    DOI: 10.1016/j.spa.2019.05.002
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    References listed on IDEAS

    as
    1. Gobet, Emmanuel, 2000. "Weak approximation of killed diffusion using Euler schemes," Stochastic Processes and their Applications, Elsevier, vol. 87(2), pages 167-197, June.
    2. Paolo Baldi & Lucia Caramellino & Maria Gabriella Iovino, 1999. "Pricing General Barrier Options: A Numerical Approach Using Sharp Large Deviations," Mathematical Finance, Wiley Blackwell, vol. 9(4), pages 293-321, October.
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