January 20, 2022

Exact simulation of the first time a diffusion process overcomes a given threshold

Abstract: The aim of our study is to propose a new exact simulation method for the first passage time (FPT) of a diffusion process (X_t , t ≥ 0). We shall consider either a continuous diffusion process (in collaboration with Cristina Zucca, University of Turin) or a jump diffusion (in collaboration with Nicolas Massin, University of Valenciennes). We define τ_L the first passage time through the level L:  

                                            τ_L := inf{t ≥ 0 : X_t ≥ L}.
In order to exactly simulate τ_L , we cannot use an explicit expression of its density. The classical way to overcome this difficulty is to use efficient algorithms for the simulation of sample paths, like discretization schemes. Such methods permit us to obtain approximations of the first-passage times as a by-product. For efficiency reasons, it is particularly challenging to simulate directly this hitting time by avoiding constructing the whole path. The authors introduce a new rejection sampling algorithm which permits to perform of an exact simulation of the first-passage time for general one-dimensional diffusion processes. The main ideas are based both on a previous algorithm pointed out by A. Beskos et G. O. Roberts which uses Girsanov’s transformation and on properties of Bessel paths. The efficiency of the method is described through theoretical results and numerical examples.
This is joint work with Cristina ZUCCA, University of Turin, Italy, and Nicolas MASSIN, University of Valenciennes, France.

Speaker: Prof. Samuel Herrmann (University of Burgundy, France)

Coordinator: Dr. Antoine-Marie Bogso (Research Associate, AIMS Ghana)

Zoom Link: https://zoom.us/j/92605380740?pwd=WWdJMEFIc1ZOY1lUdzZqRWxGYW1UUT09
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Passcode: 107706

Zoom Meeting Start Time: 2:45 pm (Accra Time)

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