Sensitivity analysis of long-term cash flows
Hyungbin Park ()
Additional contact information
Hyungbin Park: Seoul National University
Finance and Stochastics, 2018, vol. 22, issue 4, 773-825
Abstract This paper conducts a sensitivity analysis of long-term cash flows. The price of the cash flow at time zero is given by the pricing operator of a Markov diffusion acting on the cash flow function. We study the extent to which the price of the cash flow is affected by small perturbations of the underlying Markov diffusion. The main tool is the Hansen–Scheinkman decomposition, which is a method to express the cash flow in terms of eigenvalues and eigenfunctions of the pricing operator. By incorporating techniques developed by Fournié et al. (Finance Stoch. 3:391–412, 1999), the sensitivities of long-term cash flows can be represented via simple expressions in terms of eigenvalues and eigenfunctions.
Keywords: Long-term cash flows; Hansen–Scheinkman decomposition; Sensitivity analysis; 60J70; 91G20 (search for similar items in EconPapers)
JEL-codes: C52 G13 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s00780-018-0370-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:finsto:v:22:y:2018:i:4:d:10.1007_s00780-018-0370-x
Ordering information: This journal article can be ordered from
http://www.springer. ... ance/journal/780/PS2
Access Statistics for this article
Finance and Stochastics is currently edited by M. Schweizer
More articles in Finance and Stochastics from Springer
Bibliographic data for series maintained by Sonal Shukla ().