Stochastic Integral Representations of the Extrema of Time-homogeneous Diffusion Processes |
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Authors: | Runhuan Feng |
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Institution: | 1.University of Illinois at Urbana-Champaign,Urbana,USA |
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Abstract: | The stochastic integral representations (martingale representations) of square integrable processes are well-studied problems in applied probability with broad applications in finance. Yet finding explicit expression is not easy and typically done through the Clack-Ocone formula with the advanced machinery of Malliavin calculus. To find an alternative, Shiryaev and Yor (Teor Veroyatnost i Primenen 48(2):375–385, 2003) introduced a relatively simple method using Itô’s formula to develop representations for extrema of Brownian motion. In this paper, we extend their work to provide representations of functionals of time-homogeneous diffusion processes based on the Itô’s formula. |
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