Mathematical Finance and Probability Seminars (Since covid these events are taking place online.)

Sensitivity analysis of long-term cash flows

Tuesday, April 04, 2017 at 11:45am - 12:45pm

Hyungbin Park, Worcester Polytechnic Institute

Hyungbin Park, Worcester Polytechnic Institute:  This talk discusses a sensitivity analysis of long-term cash flows, which is given as a pricing operator of a Markov diffusion. We study how much the cash flows is vulnerable to small perturbations of the underlying Markov diffusion. The main tool is the Hansen-Scheinkman decomposition, which is a technique expressing the cash flow by the eigenvalue and eigenfunction of the pricing operator. By combining the results of Fournie et al., we conclude that the sensitivities of long-term cash flows can be represented in simple forms of the eigenvalue and the eigenfunction.
Location   Hill 705