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Lookup NU author(s): Dr Xiaojing Song
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0).
The singular diffusion processes developed by William Feller occupy a central role in a number of disciplines including economics and finance. We identify a fundamental inconsistency between the probability densities stated in the Feller papers for these singular diffusion processes. Moreover, we apply the method of group-invariance to resolve this inconsistency. Since logarithmic returns are of considerable importance in economics and finance, we also illustrate a procedure for determining the conditional expected logarithmic rate of return for state variables which evolve in terms ofthe singular diffusion processes on which the Feller papers are based.
Author(s): Liu S, Melia A, Song X, Tippett M
Publication type: Article
Publication status: Published
Journal: European Journal of Finance
Online publication date: 12/01/2020
Acceptance date: 26/11/2019
Date deposited: 07/01/2021
ISSN (print): 1351-847X
ISSN (electronic): 1466-4364
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