Simulation of Brownian motion at first-passage times

We show how to simulate Brownian motion not on a regular time grid, but on a regular spatial grid. That is, when it first hits points in δZ for some δ>0. Central to our method is an algorithm for the exact simulation of τ, the first time Brownian motion hits ±1. This work is motivated by boundary hitting problems for time-changed Brownian motion, such as appear in mathematical finance when pricing barrier-options.

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Year of publication:	2008
Authors:	Burq, Zaeem A. ; Jones, Owen D.
Published in:	Mathematics and Computers in Simulation (MATCOM). - Elsevier, ISSN 0378-4754. - Vol. 77.2008, 1, p. 64-71
Publisher:	Elsevier
Subject:	Brownian motion \| Simulation \| First-passage time \| Boundary crossing \| Barrier-option

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011050323