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Sensitivity Analysis of Long-Term Cash Flows

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  • Hyungbin Park

Abstract

In this article, a sensitivity analysis of long-term cash flows with respect to perturbations in the underlying process is presented. For this purpose, we employ the martingale extraction through which a pricing operator is transformed into what is easier to address. The method of Fournie et al. will be combined with the martingale extraction. We prove that the sensitivity of long-term cash flows can be represented in a simple form.

Suggested Citation

  • Hyungbin Park, 2015. "Sensitivity Analysis of Long-Term Cash Flows," Papers 1511.03744, arXiv.org, revised Sep 2018.
    • Handle: RePEc:arx:papers:1511.03744
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    References listed on IDEAS

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    10. Han, Jihun & Park, Hyungbin, 2015. "The intrinsic bounds on the risk premium of Markovian pricing kernels," Finance Research Letters, Elsevier, vol. 13(C), pages 36-44.
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    12. Jihun Han & Hyungbin Park, 2014. "The Intrinsic Bounds on the Risk Premium of Markovian Pricing Kernels," Papers 1411.4606, arXiv.org, revised Sep 2015.
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    Cited by:

    1. Hyungbin Park, 2021. "Influence of risk tolerance on long-term investments: A Malliavin calculus approach," Papers 2104.00911, arXiv.org.
    2. Hyungbin Park & Heejun Yeo, 2022. "Dynamic and static fund separations and their stability for long-term optimal investments," Papers 2212.00391, arXiv.org, revised Mar 2023.
    3. Hyungbin Park, 2019. "Convergence rates of large-time sensitivities with the Hansen--Scheinkman decomposition," Papers 1912.03404, arXiv.org, revised Jan 2021.
    4. Hyungbin Park, 2021. "Modified Mean-Variance Risk Measures for Long-Term Portfolios," Mathematics, MDPI, vol. 9(2), pages 1-23, January.

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