Long- and short-time asymptotics of the first-passage time of the Ornstein–Uhlenbeck and other mean-reverting processes

Abstract

The first-passage problem of the Ornstein–Uhlenbeck process to a boundary is a long-standing problem with no known closed-form solution except in specific cases. Taking this as a starting-point, and extending to a general mean-reverting process, we investigate the long- and short-time asymptotics using a combination of Hopf–Cole and Laplace transform techniques. As a result we are able to give a single formula that is correct in both limits, as well as being exact in certain special cases. We demonstrate the results using a variety of other models.