Hunt process

Abstract: Static and discrete time pricing operators for two price economies are reviewed and then generalized to the continuous time setting of an underlying Hunt process. The continuous time operators define nonlinear partial integro–differential equations that are solved numerically for the three valuations of bid, ask and expectation. The operators employ concave distortions by inducing a probability into the infinitesimal generator of a Hunt process. This probability is then distorted. Two nonlinear operators based on different approaches to truncating small jumps are developed and termed $$QV$$ for quadratic variation and $$NL$$ for normalized Levy. Examples illustrate the resulting valuations. A sample book of derivatives on a single underlier is employed to display the gap between the bid and ask values for the book and the sum of comparable values for the components of the book.

Abstract: Let $E$ be a locally compact separable metric space and $m$ be a positive Radon measure on it. Given a nonnegative function $k$ defined on $E\times E$ off the diagonal whose anti-symmetric part is assumed to be less singular than the symmetric part, we construct an associated regular lower bounded semi-Dirichlet form $\eta$ on $L^2(E;m)$ producing a Hunt process $X^0$ on $E$ whose jump behaviours are governed by $k$. For an arbitrary open subset $D\subset E$, we also construct a Hunt process $X^{D,0}$ on $D$ in an analogous manner. When $D$ is relatively compact, we show that $X^{D,0}$ is censored in the sense that it admits no killing inside $D$ and killed only when the path approaches to the boundary. When $E$ is a $d$-dimensional Euclidean space and $m$ is the Lebesgue measure, a typical example of $X^0$ is the stable-like process that will be also identified with the solution of a martingale problem up to an $\eta$-polar set of starting points. Approachability to the boundary $\partial D$ in finite time of its censored process $X^{D,0}$ on a bounded open subset $D$ will be examined in terms of the polarity of $\partial D$ for the symmetric stable processes with indices that bound the variable exponent $\alpha(x)$.

Abstract: Using the standard tools of Daniell–Stone integrals, Stone–Cech compactification, and Gelfand transform, we show explicitly that any closed Dirichlet form defined on a measurable space can be transformed into a regular Dirichlet form on a locally compact space. This implies existence, on the Stone–Cech compactification, of the associated Hunt process. As an application, we show that for any separable resistance form in the sense of Kigami there exists an associated Markov process. Bibliography: 29 titles.