Simulating perpetuities (Q5936989)

Perpetuity is the random variable \(Y=1+W_1+W_1W_2+W_1W_2W_3+\dots\), where \(W_i\) are independent nonnegative identically distributed random variables with the mean value less than one for all \(i\). It occurs in many fields (financial mathematics, hydrology, insurance and Hoare's selection algorithm). The paper presents an algorihm generating (pseudo)random numbers with the distribution of \(Y\). The case when the \(W_i\) have the distribution of \(U**(1/b)\), \(b>0\), where \(U\) is uniformly distributed on the interval \(\langle 0,1\rangle\), is dicussed in details and a new rejection method is presented. The algorithm is based on quite complex theoretical results. The main result states, that the proposed rejection algorithm halts with probability one and for some \(b\) the mean duration of the algorithm to generate a new random number is finite. No results on the experiments with the algorithm are mentioned.