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A Note on the Distribution of Multivariate Brownian Extrema

Author

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  • Marcos Escobar
  • Julio Hernandez

Abstract

This paper presents a closed-form solution for the joint probability of the endpoints and minimums of a multidimensional Wiener process for some correlation matrices. This is the only explicit expressions found in the literature for this joint probability. The analysis can only be carried out for special correlation structures as it is related to the fundamentals regions of irreducible spherical simplexes generated by reflections and the link to the method of images. This joint distribution can be used in financial mathematics to obtain prices of credit or market related products in high dimension. The solution could be generalized to account for stochastic volatility and other stylized features of the financial markets.

Suggested Citation

  • Marcos Escobar & Julio Hernandez, 2014. "A Note on the Distribution of Multivariate Brownian Extrema," International Journal of Stochastic Analysis, Hindawi, vol. 2014, pages 1-6, November.
    • Handle: RePEc:hin:jnijsa:575270
    DOI: 10.1155/2014/575270
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    Cited by:

    1. G. A. Delsing & M. R. H. Mandjes & P. J. C. Spreij & E. M. M. Winands, 2020. "Asymptotics and Approximations of Ruin Probabilities for Multivariate Risk Processes in a Markovian Environment," Methodology and Computing in Applied Probability, Springer, vol. 22(3), pages 927-948, September.
    2. Diana Dorobantu & Yahia Salhi & Pierre-E. Thérond, 2020. "Modelling Net Carrying Amount of Shares for Market Consistent Valuation of Life Insurance Liabilities," Methodology and Computing in Applied Probability, Springer, vol. 22(2), pages 711-745, June.
    3. Marcos Escobar & Sven Panz, 2016. "A Note on the Impact of Parameter Uncertainty on Barrier Derivatives," Risks, MDPI, vol. 4(4), pages 1-25, September.
    4. Diana Dorobantu & Yahia Salhi & Pierre-Emmanuel Thérond, 2018. "Modelling net carrying amount of shares for market consistent valuation of life insurance liabilities," Working Papers hal-01840057, HAL.

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