One-dimensional and planar random motions with variable propagation speeds

TL;DR

The paper develops one- and two-dimensional random motions with variable velocity, showing that space-varying speeds can be reduced to constant-velocity telegraph dynamics via nonlinear transformations. It introduces generalized Euler polynomials $E_n^{(a,\theta)}(x)$ to express moments in bounded settings and analyzes planar extensions with orthogonal directions, including boundary mass phenomena. It also treats direction-dependent and time-dependent velocities, providing explicit density representations and hydrodynamic limits: convergence to Brownian motion in some regimes and to Itô integrals in time-dependent cases. Finally, it links these stochastic models to financial applications by constructing finite-velocity multivariate motions that converge to correlated geometric Brownian motions, offering exact distributions and potential pricing implications for multi-asset options.

Abstract

In this paper, we study univariate and planar random motions with variable propagation speeds. We first consider motions with space-varying velocity, which can be reduced to constant-velocity motions by means of suitable nonlinear transformations. We examine a special case of a motion which is confined within the unit interval. To provide a general expression of the moments of this process, we introduce a new family of polynomials which generalize the classical Euler polynomials. We then examine a planar extension of this process which moves along orthogonal directions. A process with velocity depending on the direction is also examined, and its mean conditional on the initial direction and the number of direction changes is given in terms of confluent hypergeometric functions. We conjecture that, in the hydrodynamic limit, this process is absorbed at a point in an arbitrarily small time. We finally study a motion with time-dependent velocity. We prove that this process can be represented as an integral with respect to a standard telegraph process, and we obtain its covariance function explicitly. Moreover, we show that this process behaves as a Itô integral with respect to Brownian motion in the hydrodynamic limit.

Figures (3)

• Figure 1: boundary $\partial R_t$ of the support of the process $(X(t),\,Y(t))$ with space-varying velocity given by formula (\ref{['1-x^2']}). The equations describing the four sides of the boundary are given explicitly in the figure. It can be easily verified that, as $t\to+\infty$, the boundary approaches the square $[-1,1]^2$. The support can be obtained by applying a suitable nonlinear transformation to the square support of the process $(U(t),\,V(t))$ with constant velocity. Two sample paths are illustrated. The red path alternates only two contiguous directions, and thus corresponds to a particle lying on the boundary of the support.
• Figure 2: subdivision of the integration set $[0,t]^2$ used to prove the hydrodynamic limit of the covariance function of the process $X(t)$. Observe that, as $\lambda\to+\infty$, the strip $Q$ collapses onto the diagonal of the square.
• Figure 3: the black arrows indicate the four possible directions of motion for the process $(X(t), Y(t))$. For each direction, the colored arrows show the possible transitions when a direction change occurs: red arrows correspond to directions changes that occur with probability $p$, while green arrows correspond to direction changes that occur with probability $1-p$.

Theorems & Definitions (12)

• Theorem 1
• proof
• Theorem 2
• proof
• Theorem 3
• proof
• Theorem 4
• proof
• Theorem 5
• proof