On the first-passage area of a L$\acute{\text{e}}$vy process

TL;DR

This paper analyzes the joint distribution of the first-passage time below zero and the area swept out by a Lévy process, deriving differential equations and recursive algorithms for moments, with special cases and expectations.

Contribution

It introduces differential-difference equations for Laplace transforms and a recursive algorithm for moments of the first-passage time and area for Lévy processes.

Findings

Derived differential-difference equations for Laplace transforms.

Developed recursive algorithms for moments of passage time and area.

Obtained explicit expectations in special cases.

Abstract

Let be $X(t)= x - \mu t + \sigma B_t - N_t$ a L$\acute{\text{e}}$vy process starting from $x >0,$ where $ \mu \ge 0, \ \sigma \ge 0, \ B_t$ is a standard BM, and $N_t$ is a homogeneous Poisson process with intensity $ \theta >0,$ starting from zero. We study the joint distribution of the first-passage time below zero, $\tau (x),$ and the first-passage area, $A(x),$ swept out by $X$ till the time $\tau (x).$ In particular, we establish differential-difference equations with outer conditions for the Laplace transforms of $\tau(x)$ and $A(x),$ and for their joint moments. In a special case $(\mu = \sigma =0),$ we show an algorithm to find recursively the moments $E[\tau(x)^m A(x)^n],$ for any integers $m$ and $n;$ moreover, we obtain the expected value of the time average of $X$ till the time $\tau(x).$