Volterra Integral Reduction for Boundary Diffusion Problems

Source abstract

This paper addresses a class of integral representations of the form $$\begin{equation} f(t,x)=g(t,x)+\int_0^t k(t,s)\, p(t-s,x,y)\, \partial_x f(s,y^+)\,ds, \qquad 0 \le t \le T, \end{equation}$$ where $f$ is unknown, $p$ is the transition density of a diffusion process, and $g, k$ are prescribed functions. For an arbitrary diffusion process with sufficiently regular coefficients, we prove that this problem is equivalent to a Volterra integral equation of the second kind. This reduction provides a unified framework for both theoretical analysis and numerical approximation. An example of the implementation in the context of financial mathematics is presented.