A survey and some generalizations of Bessel processes

Abstract

Bessel processes play an important role in financial mathematics because of their strong relation to financial models such as geometric Brownian motion or Cox-Ingersoll-Ross processes. We are interested in the first time that Bessel processes and, more generally, radial Ornstein-Uhlenbeck processes hit a given barrier. We give explicit expressions of the Laplace transforms of first hitting times by (squared) radial Ornstein-Uhlenbeck processes, that is, Cox-Ingersoll-Ross processes. As a natural extension we study squared Bessel processes and squared Ornstein-Uhlenbeck processes with negative dimensions or negative starting points and derive their properties. © 2003 ISI/BS.