Singular diffusions, constant elasticity of variance processes and logarithmic rates of return

Title: Singular diffusions, constant elasticity of variance processes and logarithmic rates of return
Creator: Liu, Siqi; Melia, Adrian; Song, Xiaojing; Tippett, Mark
Relation: The European Journal of Finance Vol. 26, Issue 9, p. 837-853
Publisher Link: http://dx.doi.org/10.1080/1351847x.2019.1709526
Publisher: Routledge
Resource Type: journal article
Date: 2020
Description: The singular diffusion processes developed by William Feller occupy a central role in a number of disciplines including economics and finance. We identify a fundamental inconsistency between the probability densities stated in the Feller papers for these singular diffusion processes. Moreover, we apply the method of group-invariance to resolve this inconsistency. Since logarithmic returns are of considerable importance in economics and finance, we also illustrate a procedure for determining the conditional expected logarithmic rate of return for state variables which evolve in terms of the singular diffusion processes on which the Feller papers are based.
Subject: constant elasticity of variance (CEV); Kolmogorov equation; group invariance; logarithmic return; singular diffusion process
Identifier: http://hdl.handle.net/1959.13/1438376
Identifier: uon:40589
Identifier: ISSN:1351-847X
Language: eng
Reviewed

		Thumbnail	File	Description	Size	Format