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Applications of The Reflected Ornstein-Uhlenbeck Process

Ha, Won Ho (2009) Applications of The Reflected Ornstein-Uhlenbeck Process. Doctoral Dissertation, University of Pittsburgh. (Unpublished)

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An Ornstein-Uhlenbeck process is the most basic mean-reversion model and has been used in various fields such as finance and biology. In some instances, reflecting boundary conditions are needed to restrict the state space of this process. We study an Ornstein-Uhlenbeck diffusion process with a reflecting boundary and its application to finance and neuroscience. In the financial application, the Vasicek model which is an Ornstein-Uhlenbeck process has been used to capture the stochastic movement of the short term interest rate in the market. The shortcoming of applying this model is that it allows a negative interest rate theoretically. Thus we use a reflected Ornstein-Uhlenbeck process as an interest rate model to get around this problem. Then we price zero-coupon bond and European options with respect to our model. In the application to neuroscience, we study integrate-and-fire (I-F) neuron models. We assume that the membrane voltage follows a reflected Ornstein-Uhlenbeck process and fires when it reaches a threshold. In this case, the interspike intervals (ISIs) are the same as the first hitting times of the process to a certain barrier. We find the first passage time density given ISIs using numerical inversion integration of the Laplace transform of the first passage time pdf. Then we estimate the unknown identifiable parameters in our model.


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Item Type: University of Pittsburgh ETD
Status: Unpublished
CreatorsEmailPitt UsernameORCID
Ha, Won
ETD Committee:
TitleMemberEmail AddressPitt UsernameORCID
Committee ChairIyengar, Satishssi@pitt.eduSSI
Committee MemberChadam, Johnchadam@pitt.eduCHADAM
Committee MemberGleser, Leon Jgleser@pitt.eduGLESER
Committee MemberSavits, Thomas Hsavits@pitt.eduSAVITS
Date: 15 June 2009
Date Type: Completion
Defense Date: 8 April 2009
Approval Date: 15 June 2009
Submission Date: 21 April 2009
Access Restriction: 5 year -- Restrict access to University of Pittsburgh for a period of 5 years.
Institution: University of Pittsburgh
Schools and Programs: Dietrich School of Arts and Sciences > Statistics
Degree: PhD - Doctor of Philosophy
Thesis Type: Doctoral Dissertation
Refereed: Yes
Uncontrolled Keywords: First Passage Time; Interest Rate; Neural Firing; Ornstein-Uhlenbeck Process; Reflecting Boundary
Other ID:, etd-04212009-155443
Date Deposited: 10 Nov 2011 19:40
Last Modified: 15 Nov 2016 13:41


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