On the quantiles of Brownian motion and their hitting times

Abstract

The distribution of the α-quantile of a Brownian motion on an interval [0, t] has been obtained motivated by a problem in financial mathematics. In this paper we generalize these results by calculating an explicit expression for the joint density of the α-quantile of a standard Brownian motion, its first and last hitting times and the value of the process at time t. Our results can easily be generalized to a Brownian motion with drift. It is shown that the first and last hitting times follow a transformed arcsine law. © 2005 ISI/BS.