Skip to main content
Article thumbnail
Location of Repository

A correction note on the first passage time of an Ornstein-Uhlenbeck process to a boundary

By B. Leblanc, Olivier Renault and O. Scaillet

Abstract

This paper provides the derivation of the hitting time density of an Ornstein-Uhlenbeck process to a flat boundary. The derivation relies on a change of measure approach and delivers an explicit formula. This formula is an amended expression of the result given in Leblanc and Scaillet (1998). It corresponds to the formula given by a time substitution approach when the boundary level coincides with the mean of the invariant measure. It can for example be used to price digital up-and-in credit spread options when the logarithm of the credit spread is assumed to follow an Ornstein-Uhlenbeck process

Topics: HG Finance
Publisher: Springer
Year: 2000
DOI identifier: 10.1007/s007800050007
OAI identifier: oai:eprints.lse.ac.uk:18731
Provided by: LSE Research Online
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.springerlink.com/co... (external link)
  • http://eprints.lse.ac.uk/18731... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.