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Lie Symmetries Methods in Boundary Crossing Problems for Diffusion Processes

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Abstract

This paper uses Lie symmetry methods to analyze boundary crossing probabilities for a large class of diffusion processes. We show that if the Fokker–Planck–Kolmogorov equation has non-trivial Lie symmetry, then the boundary crossing identity exists and depends only on parameters of process and symmetry. For time-homogeneous diffusion processes we found the necessary and sufficient conditions of the symmetries’ existence. This paper shows that if a drift function satisfies one of a family of Riccati equations, then the problem has nontrivial Lie symmetries. For each case we present symmetries in explicit form. Based on obtained results, we derive two-parametric boundary crossing identities and prove its uniqueness. Further, we present boundary crossing identities between different process. We show, that if the problem has 6 or 4 group of symmetries then the first passage time density to any boundary can be explicitly represented in terms of the first passage time by a Brownian motion or a Bessel process. Many examples are presented to illustrate the method.

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Acknowledgements

Author is grateful to Pierre Patie and Laura Sacerdote for helpful comments and also thank the referees for useful suggestions.

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  1. Geolab, Ordzhonikidze street, 12, Moscow, Russia

    Dmitry Muravey

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Muravey, D. Lie Symmetries Methods in Boundary Crossing Problems for Diffusion Processes. Acta Appl Math 170, 347–372 (2020). https://doi.org/10.1007/s10440-020-00336-8

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