On the control of the difference between two Brownian motions: an application to energy markets modeling
Thomas Deschatre (2016)
Dependence Modeling
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We derive a model based on the structure of dependence between a Brownian motion and its reflection according to a barrier. The structure of dependence presents two states of correlation: one of comonotonicity with a positive correlation and one of countermonotonicity with a negative correlation. This model of dependence between two Brownian motions B1 and B2 allows for the value of [...] to be higher than 1/2 when x is close to 0, which is not the case when the dependence is modeled...