In this paper we present closed form solutions of some discounted optimal stopping problems for the maximum process in a model driven by a Brownian motion and a compound Poisson process with exponential jumps. The method of proof is based on reducing the initial problems to integro-differential free-boundary problems, where the normal-reflection and smooth-fit conditions may break down and the latter then replaced by the continuous-fit condition. We show that, under certain relationships on the parameters of the model, the optimal stopping boundary can be uniquely determined as a component of the solution of a two-dimensional system of nonlinear ordinary differential equations. The obtained results can be interpreted as pricing perpetual American lookback options with fixed and floating strikes in a jump-diffusion model.

In this short paper, we show how fluctuation identities for Lévy processes with no positive jumps yield the distribution of the present value of dividends paid until ruin in a Lévy insurance risk model with a dividend barrier.

Continuous-time autoregressive moving average (CARMA) processes with a nonnegative kernel and driven by a nondecreasing Lévy process constitute a very general class of stationary, nonnegative continuous-time processes. In financial econometrics a stationary Ornstein-Uhlenbeck (or CAR(1)) process, driven by a nondecreasing Lévy process, was introduced by Barndorff-Nielsen and Shephard (2001) as a model for stochastic volatility to allow for a wide variety of possible marginal distributions and the possibility of jumps. For such processes, we take advantage of the nonnegativity of the increments of the driving Lévy process to study the properties of a highly efficient estimation procedure for the parameters when observations are available of the CAR(1) process at uniformly spaced times 0,h,…,Nh. We also show how to reconstruct the background driving Lévy process from a continuously observed realization of the process and use this result to estimate the increments of the Lévy process itself when h is small. Asymptotic properties of the coefficient estimator are derived and the results illustrated using a simulated gamma-driven Ornstein-Uhlenbeck process.

We show that there exist symmetric properties in the discrete n-cube whose threshold widths range asymptotically between 1/√n and 1/logn. These properties are built using a combination of failure sets arising in reliability theory. This combination of sets is simply called a product. Some general results on the threshold width of the product of two sets A and B in terms of the threshold locations and widths of A and B are provided.

In this paper we investigate sufficient conditions that ensure the optimality of threshold strategies for optimal stopping problems with finite or perpetual maturities. Our result is based on a local-time argument that enables us to give an alternative proof of the smooth-fit principle. Moreover, we present a class of optimal stopping problems for which the propagation of convexity fails.

In this paper we develop some results presented by Gani (2004), deriving moments for random allocation processes. These moments correspond to the allocation processes reaching some domain boundary. Exact formulae for means, variances, and probability generating functions as well as some asymptotic formulae for moments of random allocation processes are obtained. A special choice of the asymptotics and of the domain allows us to reduce a complicated numerical procedure to a simple asymptotic one.

We provide a distributional study of the solution to the classical control problem due to De Finetti (1957), Gerber (1969), Azcue and Muler (2005), and Avram et al. (2007), which concerns the optimal payment of dividends from an insurance risk process prior to ruin. Specifically, we build on recent work in the actuarial literature concerning calculations of the nth moment of the net present value of dividends paid out in the optimal strategy as well as the moments of the deficit at ruin and the Laplace transform of the red period. The calculations we present go much further than the existing literature, in that our calculations are valid for a general spectrally negative Lévy process as opposed to the classical Cramér–Lundberg process with exponentially distributed jumps. Moreover, the technique we use appeals principally to excursion theory rather than integro-differential equations and, for the case of the nth moment of the net present value of dividends, makes a new link with the distribution of integrated exponential subordinators.

We investigate the large scale behaviour of a Lévy process whose jump magnitude follows a stable law with spherically inhomogenous scaling coefficients. Furthermore, the jumps are dragged in the spherical direction by a dynamical system which has an attractor.

Let u(t,x) be the displacement at time t of a point x on a string; the time variable t varies in the interval I≔[0,T] and the space variable x varies in the interval J≔[0,L], where T and L are fixed positive constants. The displacement u(t,x) is the solution to a stochastic wave equation. Two forms of random excitations are considered, a white noise in the initial condition and a nonlinear random forcing which involves the formal derivative of a Brownian sheet. In this article, we consider the continuity properties of solutions to this equation. Smoothness characteristics of these random fields, in terms of Hölder continuity, are also investigated.

A gambler starts with fortune f < 1 and plays in a Vardi casino with infinitely many tables indexed by their odds, r ≥ 0. In addition, all tables return the same expected winnings per dollar, c < 0, and a discount factor is applied after each round. We determine the optimal probability of reaching fortune 1, as well as an optimal strategy that is different from bold play for fortunes larger than a critical value depending exclusively on c and 1 + a, the discount factor. The general result is computed explicitly for some relevant special cases. The question of whether bold play is an optimal strategy is discussed for various choices of the parameters.

We study the optimal portfolio problem for an insider, in the case where the performance is measured in terms of the logarithm of the terminal wealth minus a term measuring the roughness and the growth of the portfolio. We give explicit solutions in some cases. Our method uses stochastic calculus of forward integrals.

For τ, a stopping rule adapted to a sequence of n independent and identically distributed observations, we define the loss to be E[q(Rτ)], where Rj is the rank of the jth observation and q is a nondecreasing function of the rank. This setting covers both the best-choice problem, with q(r) = 1(r > 1), and Robbins' problem, with q(r) = r. As n tends to ∞, the stopping problem acquires a limiting form which is associated with the planar Poisson process. Inspecting the limit we establish bounds on the stopping value and reveal qualitative features of the optimal rule. In particular, we show that the complete history dependence persists in the limit; thus answering a question asked by Bruss (2005) in the context of Robbins' problem.

In this paper we prove a conditional limit theorem for a critical Galton-Watson branching process {Zn; n ≥ 0} with offspring generating function s + (1 − s)L((1 − s)−1), where L(x) is slowly varying. In contrast to a well-known theorem of Slack (1968), (1972) we use a functional normalization, which gives an exponential limit. We also give an alternative proof of Sze's (1976) result on the asymptotic behavior of the nonextinction probability.

For a spectrally negative Lévy process X on the real line, let S denote its supremum process and let I denote its infimum process. For a > 0, let τ(a) and κ(a) denote the times when the reflected processes Ŷ := S − X and Y := X − I first exit level a, respectively; let τ−(a) and κ−(a) denote the times when X first reaches Sτ(a) and Iκ(a), respectively. The main results of this paper concern the distributions of (τ(a), Sτ(a), τ−(a), Ŷτ(a)) and of (κ(a), Iκ(a), κ−(a)). They generalize some recent results on spectrally negative Lévy processes. Our approach relies on results concerning the solution to the two-sided exit problem for X. Such an approach is also adapted to study the excursions for the reflected processes. More explicit expressions are obtained when X is either a Brownian motion with drift or a completely asymmetric stable process.

In the classic Dubins-Savage subfair primitive casino gambling problem, the gambler can stake any amount in his possession, winning (1 - r)/r times the stake with probability w and losing the stake with probability 1 - w, 0 ≤ w ≤ r ≤ 1. The gambler seeks to maximize the probability of reaching a fixed fortune by gambling repeatedly with suitably chosen stakes. This problem has been extended in several directions to account for limited playing time or future discounting. We propose a unifying framework that covers these extensions, and prove that bold play is optimal provided that w ≤ ½ ≤ r. We also show that this condition is in fact necessary for bold play to be optimal subject to the constraint of limited playing time.

We consider basic ergodicity properties of adaptive Markov chain Monte Carlo algorithms under minimal assumptions, using coupling constructions. We prove convergence in distribution and a weak law of large numbers. We also give counterexamples to demonstrate that the assumptions we make are not redundant.

We consider the tail behavior of the product of two independent nonnegative random variables X and Y. Breiman (1965) has considered this problem, assuming that X is regularly varying with index α and that E{Yα+ε} < ∞ for some ε > 0. We investigate when the condition on Y can be weakened and apply our findings to analyze a class of random difference equations.

We present bounds on the decay parameter for absorbing birth–death processes adapted from results of Chen (2000), (2001). We address numerical issues associated with computing these bounds, and assess their accuracy for several models, including the stochastic logistic model, for which estimates of the decay parameter have been obtained previously by Nåsell (2001).

With the rapid adoption of transgenic crops, gene flow from transgenic crops to wild relatives through pollen dispersal is of significant concern and warrants both empirical and theoretical studies to assess the risk of introduction of transgenes into wild populations. We propose to use the (biased) voter model in a heterogeneous environment to investigate the effects of recurrent gene flow from transgenic crop to wild relatives. The model is defined on the d-dimensional integer lattice that is divided into two parts, Δ and Zd \ Δ. Individuals carrying the transgene and individuals carrying the wild type gene compete according to the evolution rules of a (biased) voter model on Zd \ Δ, while the process is conditioned to have only individuals carrying the transgene on Δ. Our main findings suggest that unless transgenes confer increased fitness in wild relatives, introgression of transgenes into populations of wild plants is slow and may even be reversible without intervention. Our study also addresses the effects of different spatial planting patterns of transgenic crops on the rate of introgression.

In this paper we present some necessary conditions for the uniqueness, recurrence, and ergodicity of a class of multidimensional Q-processes, using the dual Yan-Chen comparison method. Then the coupling method is used to study the multidimensional processes in a specific space. As applications, three models of particle systems are illustrated.