Approximations for the Distribution of Perpetuities with Small Discount Rates (with P. Glynn).

Summary:

This paper revisits a paper of Ward Whitt (“Stochastic Abelian and Tauberian Theorems” eitschrift für Wahrscheinlichkeitstheorie und verw. Gebiete, vol. 22, 1972). In that paper Ward concentrated on the distribution of perpetuities with small (but deterministic!) discount rates. We study random discount rates and provide associated Edgeworth expansions. We are able to develop approximations for the distribution of an infinite horizon discounted reward with a Cox-Ingersoll-Ross model for the interest rates.

Bibtex:

@Article{BlaGly11,

author = { J. Blanchet and P. Glynn},

title = {Approximations for the distribution of perpetuities with small discount rates},

journal = {Pre-print},

year = {2011},

volume = {},

pages = {}

}