A fractional PDE for first passage time of time-changed Brownian motion and its numerical solution

We show that the First-Passage-Time probability distribution of a Levy time-changed Brownian motion with drift is solution of a time fractional advection-diffusion equation subject to initial and boundary conditions; the Caputo fractional derivative with respect to time is considered. We propose a high order compact implicit discretization scheme for solving this fractional PDE problem and we show that it preserves the structural properties (non-negativity, boundedness, time monotonicity) of the theoretical solution, having to be a probability distribution. Numerical experiments confirming such findings are reported. Simulations of the sample paths of the considered process are also performed and used to both provide suitable boundary conditions and to validate the numerical results. (C) 2019 IMACS. Published by Elsevier B.V. All rights reserved.