Numerical Techniques in Lévy Fluctuation Theory

This paper presents a framework for numerical computations in fluctuation theory for Lévy processes. More specifically, with $\bar X_t:= \sup_{0\le s\le t} X_s$ denoting the running maximum of the Lévy process X _t , the aim is to evaluate ${\mathbb P}(\bar X_t \le x)$ for t,x?>?0. We do so by approximating the Lévy process under consideration by another Lévy process for which the double transform ${\mathbb E} e^{-\alpha \bar X_{\tau(q)}}$ is known, with τ(q) an exponentially distributed random variable with mean 1/q; then we use a fast and highly accurate Laplace inversion technique (of almost machine precision) to obtain the distribution of $\bar X_t$ . A broad range of examples illustrates the attractive features of our approach.     

A Note on Malliavin Fractional Smoothness for Lévy Processes and Approximation

Assume a Lévy process (X _t ) _t?∈?[0,1] that is an L ₂-martingale and let Y be either its stochastic exponential or X itself. For certain integrands φ we investigate the behavior of $$ \bigg \|\int_{(0,1]} {{\varphi}}_t dX_t - \sum_{k=1}^N v_{k-1} (Y_{t_k}-Y_{t_{k-1}}) \bigg \|_{L_2}, $$ where v _k???1 is ${\mathcal{F}}_{t_{k-1}}$ -measurable, in dependence on the fractional smoothness in the Malliavin sense of $\int_{(0,1]} {{\varphi}}_t dX_t$ . A typical situation where these techniques apply occurs if the stochastic integral is obtained by the Galtchouk–Kunita–Watanabe decomposition of some f(X ₁). Moreover, using the example f(X ₁)?=?1_(K,?∞?)(X ₁) we show how fractional smoothness depends on the distribution of the Lévy process.     

The Hausdorff Dimension of Operator Semistable Lévy Processes

Let X={X(t)} _t≥0 be an operator semistable Lévy process in ? ^d with exponent E, where E is an invertible linear operator on ? ^d and X is semi-selfsimilar with respect to E. By refining arguments given in Meerschaert and Xiao (Stoch. Process. Appl. 115, 55–75, 2005) for the special case of an operator stable (selfsimilar) Lévy process, for an arbitrary Borel set B??₊ we determine the Hausdorff dimension of the partial range X(B) in terms of the real parts of the eigenvalues of E and the Hausdorff dimension of B.     

Random matrix models of stochastic integral type for free infinitely divisible distributions

The Bercovici-Pata bijection maps the set of classical infinitely divisible distributions to the set of free infinitely divisible distributions. The purpose of this work is to study random matrix models for free infinitely divisible distributions under this bijection. First, we find a specific form of the polar decomposition for the Lévy measures of the random matrix models considered in Benaych-Georges [6] who introduced the models through their laws. Second, random matrix models for free infinitely divisible distributions are built consisting of infinitely divisible matrix stochastic integrals whenever their corresponding classical infinitely divisible distributions admit stochastic integral representations. These random matrix models are realizations of random matrices given by stochastic integrals with respect to matrix-valued Lévy processes. Examples of these random matrix models for several classes of free infinitely divisible distributions are given. In particular, it is shown that any free selfdecomposable infinitely divisible distribution has a random matrix model of Ornstein-Uhlenbeck type ?? ₀ ^?? e ^?1 d?? _t ^d , d ?? 1, where ?? _t ^d is a d × d matrix-valued Lévy process satisfying an I _log condition.     

On the absolute continuity of multidimensional Ornstein-Uhlenbeck processes

Let X be a n-dimensional Ornstein-Uhlenbeck process, solution of the S.D.E. $${\rm d}X_{t}\; =\; AX_{t} {\rm d}t \; +\; {\rm d}B_t$$ where A is a real n?× n matrix and B a Lévy process without Gaussian part. We show that when A is non-singular, the law of X ₁ is absolutely continuous in ${\mathbb{R}^n}$ if and only if the jumping measure of B fulfils a certain geometric condition with respect to A, which we call the exhaustion property. This optimal criterion is much weaker than for the background driving Lévy process B, which might be singular and sometimes even have a one-dimensional discrete jumping measure. This improves on a result by Priola and Zabczyk.     

Sharp Estimates on the Green Functions of Perturbations of Subordinate Brownian Motions in Bounded \boldsymbol{\kappa}-Fat Open Sets

In this paper we study perturbations of a large class of subordinate Brownian motions in bounded κ-fat open sets, which include bounded John domains. Suppose that X is such a subordinate Brownian motion and that J is the Lévy density of X. The main result of this paper implies, in particular, that if Y is a symmetric Lévy process with Lévy density J ^Y satisfying |J ^Y (x)???J(x)|?≤?c max {|x|^???d?+?ρ , 1} for some c?>?0,ρ?∈?(0, d), then for any bounded John domain D the Green function $G^Y_D$ of Y in D is comparable to the Green function G _D of X in D. One of the main tools of this paper is the drift transform introduced in Chen and Song (J Funct Anal 201:262–281, 2003). To apply the drift transform, we first establish a generalized 3G theorem for X.     

Harmonic analysis of additive Lévy processes

Let X ₁, . . . ,X _N denote N independent d-dimensional Lévy processes, and consider the N-parameter random field $$\mathfrak{X}(t) := X_1(t_1)+\cdots+ X_N(t_N).$$ First we demonstrate that for all nonrandom Borel sets ${F\subseteq{{\bf R}^d}}$ , the Minkowski sum ${\mathfrak{X}({{\bf R}^{N}_{+}})\oplus F}$ , of the range ${\mathfrak{X}({{\bf R}^{N}_{+}})}$ of ${\mathfrak{X}}$ with F, can have positive d-dimensional Lebesgue measure if and only if a certain capacity of F is positive. This improves our earlier joint effort with Yuquan Zhong by removing a certain condition of symmetry in Khoshnevisan et al. (Ann Probab 31(2):1097–1141, 2003). Moreover, we show that under mild regularity conditions, our necessary and sufficient condition can be recast in terms of one-potential densities. This rests on developing results in classical (non-probabilistic) harmonic analysis that might be of independent interest. As was shown in Khoshnevisan et al. (Ann Probab 31(2):1097–1141, 2003), the potential theory of the type studied here has a large number of consequences in the theory of Lévy processes. Presently, we highlight a few new consequences.     

Sub-Markovian C 0-Semigroups Generated by Fractional Laplacian with Gradient Perturbation

We present a sufficient condition for fractional Laplacian with gradient perturbation to generate a sub-Markovian C ₀-semigroup on ${L^1(\mathbb{R}^d, dx)}$ . The condition also yields the ultracontractivity of the semigroup and an upper on-diagonal estimate of the associated transition kernel. Based on the subordination technique, the extension to general pure jump Lévy process with gradient perturbation is studied. As a direct application, we obtain sufficient conditions for the strong Feller property of stochastic differential equations driven by additive Lévy process.     

Structural properties of reflected Lévy processes

This paper considers a number of structural properties of reflected Lévy processes, where both one-sided reflection (at 0) and two-sided reflection (at both 0 and K>0) are examined. With V _t being the position of the reflected process at time t, we focus on the analysis of $\zeta(t):=\mathbb{E}V_{t}$ and $\xi(t):=\mathbb{V}\mathrm{ar}V_{t}$ . We prove that for the one- and two-sided reflection, ζ(t) is increasing and concave, whereas for the one-sided reflection, ξ(t) is increasing. In most proofs we first establish the claim for the discrete-time counterpart (that is, a reflected random walk), and then use a limiting argument. A key step in our proofs for the two-sided reflection is a new representation of the position of the reflected process in terms of the driving Lévy process.     

Stochastic Comparison for Lévy-Type Processes

The main goal of this paper is to establish necessary and sufficient conditions for stochastic comparison of two general Lévy-type processes on ? ^d . By refining the test functions in Wang (Acta Math. Sin. Engl. Ser. 25:741–758, 2009), mainly the test functions of diffusion coefficients, we get the necessary conditions. The sufficiency of the conditions is obtained by constructing a new sequence of finite Lévy measures {ν ⁿ } _n≥1 different from the one in Wang (Acta Math. Sin. Engl. Ser. 25:741–758, 2009) to approach the Lévy measure ν.     

A geometric interpretation of the transition density of a symmetric Lévy process

We study for a class of symmetric Lévy processes with state space R n the transition density pt（x） in terms of two one-parameter families of metrics, （dt）t>0 and （δt）t>0. The first family of metrics describes the diagonal term pt（0）; it is induced by the characteristic exponent ψ of the Lévy process by dt（x, y） = ^1/2tψ（x-y）. The second and new family of metrics δt relates to ^1/2tψ through the formulawhere F denotes the Fourier transform. Thus we obtain the following "Gaussian" representation of the transition density: pt（x） = pt（0）e- δ2t （x,0） where pt（0） corresponds to a volume term related to tψ and where an "exponential" decay is governed by δ2t . This gives a complete and new geometric, intrinsic interpretation of pt（x）.     

Symmetric rearrangements around infinity with applications to Lévy processes

We prove a new rearrangement inequality for multiple integrals, which partly generalizes a result of Friedberg and Luttinger (Arch Ration Mech 61:35–44, 1976) and can be interpreted as involving symmetric rearrangements of domains around $\infty $ . As applications, we prove two comparison results for general Lévy processes and their symmetric rearrangements. The first application concerns the survival probability of a point particle in a Poisson field of moving traps following independent Lévy motions. We show that the survival probability can only increase if the point particle does not move, and the traps and the Lévy motions are symmetrically rearranged. This essentially generalizes an isoperimetric inequality of Peres and Sousi (Geom Funct Anal 22(4):1000–1014, 2012) for the Wiener sausage. In the second application, we show that the $q$ -capacity of a Borel measurable set for a Lévy process can only decrease if the set and the Lévy process are symmetrically rearranged. This result generalizes an inequality obtained by Watanabe (Z Wahrsch Verw Gebiete 63:487–499, 1983) for symmetric Lévy processes.     

Estimates of C m-Capacity of Compact Sets in ℝ N

For a given homogeneous elliptic partial differential operator L with constant complex coefficients, the Banach space V of distributions in $\mathbb{R}^N $ and a compact set X in $\mathbb{R}^N $ , we study the quantity $\lambda _{V,L} (X)$ equal to the distance in V from the class of functions f ₀ satisfying the equation Lf ₀ = 1 in a neighborhood of X (depending on f ₀) to the solution space of the equation Lf= 0 in the neighborhoods of X. For V=BC ^m , we obtain upper and lower bounds for $\lambda _{V,L} (X)$ in terms of the metric properties of the set X, which allows us to obtain estimates for $\lambda _{V,L} (X)$ for a wide class of spaces V.     

Exponential mixing of 2D SDEs forced by degenerate Lévy noises

We modify the coupling method established in Shirikyan (Exponential mixing for randomly forced partial differential equations: method of coupling, Springer, New York, 2008) and Shirikyan (J Math Fluid Mech 6(2):169–193, 2004) and develop a technique to prove the exponential mixing of a 2D stochastic system forced by degenerate Lévy noises. In particular, these Lévy noises include α-stable noises (0 < α < 2). Thanks to the stimulating discussion (Nersesyan in Private communication 2011), this technique is promising to study the exponential mixing problem of SPDEs driven by degenerate symmetric α-stable noises.     

Local times for two-parameter Lévy processes

In this article we study the problem of existence of jointly continuous local time for two-parameter Lévy processes. Here, ‘local time’ is understood in the sense of occupation density, kand by 2-parameter Lévy process we mean a process X = {X_z: z ? [0, +∞)²} with independent and stationary increments (over rectangles of the type (s, s′] × (t, t′]). We prove that if X is $\text{R}$-valued and its lower index is greater than one, then a jointly continuous (at least outside {(x,s,t): x = 0}) local time can be obtained via Berman's method. Also, we extend to 2-parameter processes a result of Getoor and Kesten for usual Lévy processes. Implications in terms of ‘approximate local growth’ of X are stated.     

Lévy random bridges and the modelling of financial information

The information-based asset-pricing framework of Brody-Hughston-Macrina (BHM) is extended to include a wider class of models for market information. To model the information flow, we introduce a class of processes called Lévy random bridges (LRBs), generalising the Brownian bridge and gamma bridge information processes of BHM. Given its terminal value at T, an LRB has the law of a Lévy bridge. We consider an asset that generates a cash-flow X_T at T. The information about X_T is modelled by an LRB with terminal value X_T. The price process of the asset is worked out, along with the prices of options.     

Supersingular parameters of the Deuring normal form

It is proved that the supersingular parameters α of the elliptic curve E ₃(α): Y ²+αXY+Y=X ³ in Deuring normal form satisfy α=3+γ ³, where γ lies in the finite field $\mathbb{F}_{p^{2}}$ . This is accomplished by finding explicit generators for the normal closure N of the finite extension k(α)/k(j(α)), where α is an indeterminate over $k=\mathbb{F}_{p^{2}}$ , and j(α) is the j-invariant of E ₃(α). Computing an explicit algebraic form for the elements of the Galois group of the extension N/k(j) leads to some new relationships between supersingular parameters for the Deuring normal form. The function field N, which contains the function field of the cubic Fermat curve, is then used to show how the results of Fleckinger for the Deuring normal form are related to cubic theta functions.     

Fixed point theory and product,sub-, super-spaces

In this paper, we definen-segmentwise metric spaces and then we prove the following results:

1. (i)|Let (X, d) be ann-segmentwise metric space. ThenX ⁿ has the fixed point property with respect to uniformly continuous bounded functions if and only if, for any continuous functionF: C ^*(X) → C^*(X) and for anyn-tuple of distinct points x₁, x₂, ?, x_n ∈X, there exists anh ∈C ^*(X) such that $$F(h)(x_1 ) = h(x_1 ),i = 1,2,...,n;$$ whereC ^*(X) has either the uniform topology or the subspace product (Tychonoff) topology \((C^ * (X) \subseteq X^X )\) .
2. LetX _i (i = 1, 2, ?) be countably compact Hausdorff spaces such thatX ₁ × ? × X_n has the fixed point property for alln ∈N Then the product spaceX ₁ × X₂ × ? has the fixed point property. We shall also discuss several problems in the Fixed Point Theory and give examples if necessary. Among these examples, we have:
3. There exists a connected metric spaceX which can be decomposed as a disjoint union of a closed setA and an open setB such thatA andB have the fixed point property andX does not have.
4. There exists a locally compact metrizable spaceX which has the fixed point property but its one-point compactificationX ⁺ does not have the fixed point property.

Other relevant results and examples will be presented in this paper.