In this article, we study the potential theory of normal tempered stable process which is obtained by time-changing the Brownian motion with a tempered stable subordinator. Precisely, we study the asymptotic behavior of potential density and Levy density associated with tempered stable subordinator and the Green function and the Levy density associated with the normal tempered stable process. We also provide the corresponding results for normal inverse Gaussian process which is a well studied process in literature.
Multivariate tempered stable random measures (ISRMs) are constructed and their corresponding space of integrable functions is characterized in terms of a quasi-norm utilizing the so-called Rosinski measure of a tempered stable law. In the special case of exponential tempered ISRMs operator-fractional tempered stable random fields are presented by a moving-average and a harmonizable representation, respectively.
Stable laws can be tempered by modifying the Lévy measure to cool the probability of large jumps. Tempered stable laws retain their signature power law behavior at infinity, and infinite divisibility. This paper develops random walk models that converge to a tempered stable law under a triangular array scheme. Since tempered stable laws and processes are useful in statistical physics, these random walk models can provide a basic physical model for the underlying physical phenomena.
In this article, the infinite series form of the probability densities of tempered stable and inverse tempered stable subordinators are obtained using Mellin transform. Further, the densities of the products and quotients of stable and inverse stable subordinators are worked out. The asymptotic behaviours of these densities are obtained as $x \rightarrow 0^+$. Similar results for tempered and inverse tempered stable subordinators are discussed. Our results provide alternative methods to find the densities of these subordinators and complement the results available in literature.
This work defines two classes of processes, that we term {\it tempered fractional multistable motion} and {\it tempered multifractional stable motion}. They are extensions of fractional multistable motion and multifractional stable motion, respectively, obtained by adding an exponential tempering to the integrands. We investigate certain basic features of these processes, including scaling property, tail probabilities, absolute moment, sample path properties, pointwise Hölder exponent, Hölder continuity of quasi norm, (strong) localisability and semi-long-range dependence structure. These proc…
In this paper we define the closure under weak convergence of the class of p-tempered α-stable distributions. We give necessary and sufficient conditions for convergence of sequences in this class. Moreover, we show that any element in this class can be approximated by the distribution of a linear combination of elementary p-tempered α-stable random variables.
We introduce a large and flexible class of discrete tempered stable distributions, and analyze the domains of attraction for both this class and the related class of positive tempered stable distributions. Our results suggest that these are natural models for sums of independent and identically distributed random variables with tempered heavy tails tails, i.e. tails that appear to be heavy up to a point, but ultimately decay faster.
We give an explicit representation for the transition law of a tempered stable Ornstein-Uhlenbeck process and use it to develop a rejection sampling algorithm for exact simulation of increments from this process. Our results apply to general classes of both univariate and multivariate tempered stable distributions and contain a number of previously studied results as special cases.
In this article, we introduce mixtures of tempered stable subordinators (TSS). These mixtures define a class of subordinators which generalize tempered stable subordinators. The main properties like probability density function (pdf), Levy density, moments, governing Fokker-Planck-Kolmogorov (FPK) type equations, asymptotic form of potential density and asymptotic form of the renewal function for the corresponding inverse subordinator are discussed. We also generalize these results to n-th order mixtures of TSS.
Meerschaert and Sabzikar [12], [13] introduced tempered fractional Brownian/stable motion (TFBM/TFSM) by including an exponential tempering factor in the moving average representation of FBM/FSM. The present paper discusses another tempered version of FBM/FSM, termed tempered fractional Brownian/stable motion of second kind (TFBM II/TFSM II).We prove that TFBM/TFSM and TFBM II/TFSM II are different processes. Particularly, large time properties of TFBM II/TFSM II are similar to those of FBM/FSM and are in deep contrast to large time properties of TFBM/TFSM.
Rapidly decreasing tempered stable distributions are useful models for financial applications. However, there has been no exact method for simulation available in the literature. We remedy this by introducing an exact simulation method in the finite variation case. Our methodology works for the wider class of $p$-RDTS distributions.
We extend the class of tempered stable distributions first introduced in Rosinski 2007. Our new class allows for more structure and more variety of tail behaviors. We discuss various subclasses and the relation between them. To characterize the possible tails we give detailed results about finiteness of various moments. We also give necessary and sufficient conditions for the tails to be regularly varying. This last part allows us to characterize the domain of attraction to which a particular tempered stable distribution belongs.
We derive an explicit representation for the transition law of a $p$-tempered $α$-stable process of Ornstein-Uhlenbeck-type and use it to develop a methodology for simulation. Our results apply in both the univariate and multivariate cases. Special attention is given to the case where $p\leα$, which is more complicated and requires additional care.
We study a class of stochastic differential equations driven by a possibly tempered L{é}vy process, under mild conditions on the coefficients. We prove the well-posedness of the associated martingale problem as well as the existence of the density of the solution. Two sided heat kernel estimates are given as well. Our approach is based on the Parametrix series expansion
In this article, we develop Stein characterization for two-sided tempered stable distribution. Stein characterizations for normal, gamma, Laplace, and variance-gamma distributions already known in the literature follow easily. One can also derive Stein characterizations for more difficult distributions such as the distribution of product of two normal random variables, a difference between two gamma random variables. Using the semigroup approach, we obtain estimates of the solution to Stein equation. Finally, we apply these estimates to obtain error bounds in the Wasserstein-type distance for …
We study the probability of ruin before time $t$ for the family of tempered stable Lévy insurance risk processes, which includes the spectrally positive inverse Gaussian processes. Numerical approximations of the ruin time distribution are derived via the Laplace transform of the asymptotic ruin time distribution, for which we have an explicit expression. These are benchmarked against simulations based on importance sampling using stable processes. Theoretical consequences of the asymptotic formulae are found to indicate some potential drawbacks to the use of the inverse Gaussian process as a …
We discuss the properties of three upsilon transforms, which are related to the class of $p$-tempered $α$-stable ($TS^p_α$) distributions. In particular, we characterize their domains and show how they can be represented as compositions of each other. Further, we show that if $-\infty<β<α<2$ and $0<q<p<\infty$ then they can be used to transform the Lévy measures of $TS^p_β$ distributions into those of $TS^q_α$.
We consider the first-hitting time of a tempered $β$-stable subordinator, also called inverse tempered stable (ITS) subordinator. The density function of the ITS subordinator is obtained, for the index of stability $β\in (0,1)$. The series representation of the ITS density is also obtained, which could be helpful for computational purposes. The asymptotic behaviors of the $q$-th order moments of the ITS subordinator are investigated. In particular, the limiting behaviors of the mean of the ITS subordinator is given. The limiting form of the ITS density, as the space variable $x\rightarrow 0$, …
We develop efficient methods for simulating processes of Ornstein-Uhlenbeck type related to the class of $p$-tempered $α$-stable ($\ts$) distributions. Our results hold for both the univariate and multivariate cases and we consider both the case where the $\ts$ distribution is the stationary law and where it is the distribution of the background driving Lévy process (BDLP). In the latter case, we also derive an explicit representation for the transition law as this was previous known only in certain special cases and only for $p=1$ and $α\in[0,1)$. Simulation results suggest that our methods w…
Since the turn of the century, there has been increased interest in the application of heavy-tailed distributions, particularly stable distributions, to problems in physics and finance. Although, the tails of stable distributions provide a better fit to real-world data, they are too fat to describe empirical distributions. To remedy this drawback of stable distributions, so-called tempered variants of stable distributions have been proposed. In this paper, we argue that the tempering should be connected to the model leading to heavy tailed distribution and propose several tempering procedures …
A definition for elliptical tempered stable distribution, based on the characteristic function, have been explained which involve a unique spectral measure. This definition provides a framework for creating a connection between infinite divisible distribution, and particularly elliptical tempered stable distribution, with fractional calculus. Finally, some analytical approximations for the probability density function of tempered infinite divisible distribution, which elliptical tempered stable distributions are a subclass of them, are considered.
Fractional relaxation equations, as well as relaxation functions time-changed by independent stochastic processes have been widely studied (see, for example, \cite{MAI}, \cite{STAW} and \cite{GAR}). We start here by proving that the upper-incomplete Gamma function satisfies the tempered-relaxation equation (of index $ρ\in (0,1)$); thanks to this explicit form of the solution, we can then derive its spectral distribution, which extends the stable law. Accordingly, we define a new class of selfsimilar processes (by means of the $n$-times Laplace transform of its density) which is indexed by the …
Estimates of densities of convolution semigroups of probability measures are given under specific assumptions on the corresponding Lévy measure and the Lévy--Khinchin exponent. The assumptions are satisfied, e.g., by tempered stable semigroups of J. Rosi{ń}ski.
In this paper the running average of a subordinator with a tempered stable distribution is considered. We investigate a family of previously unexplored infinite-activity subordinators induced by the probability distribution of the running average process and determine their jump intensity measures. Special cases including gamma processes and inverse Gaussian processes are discussed. Then we derive easily implementable formulas for the distribution functions, cumulants, and moments, as well as provide explicit estimates for their asymptotic behaviors. Numerical experiments are conducted for ill…
This paper discusses the first exit and Dirichlet problems of the nonisotropic tempered $α$-stable process $X_t$. The upper bounds of all moments of the first exit position $\left|X_{τ_D}\right|$ and the first exit time $τ_D$ are firstly obtained. It is found that the probability density function of $\left|X_{τ_D}\right|$ or $τ_D$ exponentially decays with the increase of $\left|X_{τ_D}\right|$ or $τ_D$, and $\mathrm{E}\left[τ_D\right]\sim \left|\mathrm{E}\left[X_{τ_D}\right]\right|$,\ $\mathrm{E}\left[τ_D\right]\sim\mathrm{E}\left[\left|X_{τ_D}-\mathrm{E}\left[X_{τ_D}\right]\right|^2\right] $…
We study a class of multivariate tempered stable distributions and introduce the associated class of tempered stable Sato subordinators. These Sato subordinators are used to build additive inhomogeneous processes by subordination of a multiparameter Brownian motion. The resulting process is additive and time inhomogeneous. Furthermore, these processes are associated with the distribution at unit time of a class of Lévy process with good fit properties on fifinancial data. The main feature of the Sato subordinated Brownian motion is that it has time dependent correlation, whereas the Lévy count…
Random Walks in Cooling Random Environments (RWCRE) is a model of random walks in dynamic random environments where the entire environment is resampled along a fixed sequence of times, called the "cooling sequence," and is kept fixed in between those times. This model interpolates between that of a homogenous random walk, where the environment is reset at every step, and Random Walks in (static) Random Environments (RWRE), where the environment is never resampled. In this work we focus on the limiting distributions of one-dimensional RWCRE in the regime where the fluctuations of the correspond…
The paper investigates the rich class of Generalized Tempered Stable distribution, an alternative to Normal distribution and the $α$-Stable distribution for modelling asset return and many physical and economic systems. Firstly, we explore some important properties of the Generalized Tempered Stable (GTS) distribution. The theoretical tools developed are used to perform empirical analysis. The GTS distribution is fitted using S&P 500, SPY ETF and Bitcoin BTC. The Fractional Fourier Transform (FRFT) technique evaluates the probability density function and its derivatives in the maximum likeliho…
We use the mean exit time to quantify macroscopic dynamical behaviors of stochastic dynamical systems driven by tempered Lévy fluctuations, which are solutions of nonlocal elliptic equations. Firstly, we construct a new numerical scheme to compute and solve the mean exit time associated with the one dimensional stochastic system. Secondly, we extend the analytical and numerical results to two dimensional case: horizontal-vertical and isotropic case. Finally, we verify the effectiveness of the presented schemes with numerical experiments in several examples.
Constructing \Levy-driven Ornstein-Uhlenbeck processes is a task closely related to the notion of self-decomposability. In particular, their transition laws are linked to the properties of what will be hereafter called the \emph{a-reminder} of their self-decomposable stationary laws. In the present study we fully characterize the Lévy triplet of these a-reminder s and we provide a general framework to deduce the transition laws of the finite variation Ornstein-Uhlenbeck processes associated with tempered stable distributions. We focus finally on the subclass of the exponentially-modulated temp…
In this paper we investigate two variants of $α$-stable processes, namely tempered stable subordinators and modified tempered stable process as well as their renormalization. We study the weak convergence in the Skorohod space and prove that they satisfy the uniform tightness condition. Finally, applications to the $α$-dependence of the solutions of SDEs driven by these processes are discussed.
There are given sufficient conditions under which mixtures of dilations of Lévy spectral measures, on a Hilbert space, are Lévy measures again. We introduce some random integrals with respect to infinite dimensional Lévy processes, which in turn give some integral mappings. New classes (convolution semigroups) are introduced. One of them gives an unexpected relation between the free (Voiculescu) and the classical Lévy-Khintchine formulae while the second one coincides with tempered stable measures (Mantegna nad Stanley) arisen in statistical physics.}
In this paper, we define a new and broad family of vector-valued random fields called tempered operator fractional operator-stable random fields (TRF, for short). TRF is typically non-Gaussian and generalizes tempered fractional stable stochastic processes. TRF comprises moving average and harmonizable-type subclasses that are constructed by tempering (matrix-) homogeneous, matrix-valued kernels in time- and Fourier-domain stochastic integrals with respect to vector-valued, strictly operator-stable random measures. We establish the existence and fundamental properties of TRF. Assuming both Gau…
In this study we consider the pricing of energy derivatives when the evolution of spot prices is modeled with a normal tempered stable driven Ornstein-Uhlenbeck process. Such processes are the generalization of normal inverse Gaussian processes that are widely used in energy finance applications. We first specify their statistical properties calculating their characteristic function in closed form. This result is instrumental for the derivation of non-arbitrage conditions such that the spot dynamics is consistent with the forward curve without relying on numerical approximations or on numerica…
We extend the idea of tempering stable Levy processes to tempering more general classes of Levy processes. We show that the original process can be decomposed into the sum of the tempered process and an independent point process of large jumps. We then use this to set up a rejection sampling algorithm for sampling from the tempered process. A small scale simulation study is given to help understand the performance of this algorithm.
We investigate the properties of multifractal products of geometric Gaussian processes with possible long-range dependence and geometric Ornstein-Uhlenbeck processes driven by Lévy motion and their finite and infinite superpositions. We present the general conditions for the $L_q$ convergence of cumulative processes to the limiting processes and investigate their $q$-th order moments and Rényi functions, which are nonlinear, hence displaying the multifractality of the processes as constructed. We also establish the corresponding scenarios for the limiting processes, such as log-normal, log-gam…
We consider a Stochastic Differential Equation driven by a Lévy process whose Lévy measure satisfy a tempered stable domination. We study how a perturbation of the coefficients reflects on the density of the solution. We quantify the distance between the densities in term of the proximity of the coefficients. This extend to the stable case the works of [KKM15], where the noise is Gaussian.
