On approximation rates for boundary crossing probabilities for the multivariate Brownian motion process

S. McKinlay; K. Borovkov

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arXiv · 1503.02778

On approximation rates for boundary crossing probabilities for the multivariate Brownian motion process

S. McKinlay·K. Borovkov

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Abstract

Motivated by an approximation problem from mathematical finance, we analyse the stability of the boundary crossing probability for the multivariate Brownian motion process, with respect to small changes of the boundary. Under broad assumptions on the nature of the boundary, including the Lipschitz condition (in a Hausdorff-type metric) on its time cross-sections, we obtain an analogue of the Borovkov and Novikov (2005) upper bound for the difference between boundary hitting probabilities for "close boundaries" in the univariate case. We also obtained upper bounds for the first boundary crossing time densities.

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S. McKinlay, K. Borovkov. 2015-03-10. On approximation rates for boundary crossing probabilities for the multivariate Brownian motion process. https://arxiv.org/abs/1503.02778

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