Abstract
Given a general Itô semimartingale, its Markovian projection is an Itô process, with Markovian differential characteristics, that matches the one-dimensional marginal laws of the original process. We construct Markovian projections for Itô semimartingales with jumps, whose flows of one-dimensional marginal laws are solutions to non-local Fokker–Planck–Kolmogorov equations (FPKEs). As an application, we show how Markovian projections appear in building calibrated diffusion/jump models with both local and stochastic features.
Citation
Martin Larsson. Shukun Long. "Markovian projections for Itô semimartingales with jumps." Electron. Commun. Probab. 29 1 - 13, 2024. https://doi.org/10.1214/24-ECP635
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