Using the Girsanov transformation we derive estimates for the accuracy of piecewise approximations for one-sided and two-sided boundary crossing probabilities. We demonstrate that piecewise linear approximations can be calculated using repeated numerical integration. As an illustrative example we consider the case of one-sided and two-sided square-root boundaries for which we also present analytical representations in a form of infinite power series.
|Number of pages||12|
|Journal||Journal of Applied Probability|
|Publication status||Published - Dec 1999|
- First passage times
- Girsanov transformation
- Numerical integration
- Werner process