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Friesen, Martin; Jin, Peng

Volterra square-root process: stationarity and regularity of the law. (English) Zbl 1534.60048

Ann. Appl. Probab. 34, No. 1A, 318-356 (2024).
Summary: The Volterra square-root process on \(\mathbb{R}_+^m\) is an affine Volterra process with continuous sample paths. Under a suitable integrability condition on the resolvent of the second kind associated with the Volterra convolution kernel, we establish the existence of limiting distributions. In contrast to the classical square-root diffusion process, here the limiting distributions may depend on the initial state of the process. Our result shows that the nonuniqueness of limiting distributions is closely related to the integrability of the Volterra convolution kernel. Using an extension of the exponential-affine transformation formula, we also give the construction of stationary processes associated with the limiting distributions. Finally, we prove that the time marginals as well as the limiting distributions, when restricted to the interior of the state space \(\mathbb{R}_+^m\), are absolutely continuous with respect to the Lebesgue measure and their densities belong to some weighted Besov space of type \(B_{1, \infty}^{\lambda}\).

MSC:

60G22 Fractional processes, including fractional Brownian motion
45D05 Volterra integral equations
91G20 Derivative securities (option pricing, hedging, etc.)

Keywords:

affine Volterra processes; square-root process; Volterra integral equations; mean-reversion; limiting distributions; absolute continuity
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References:

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