Asymptotic behavior of tail density for sum of correlated lognormal variables

DOI10.1155/2009/630857MaRDI QIDQ1035169zbMATH OpenOpenAlexWikidataFDO

Authors Xin Gao, Hong Xu, Dong Ye

Publication date 10 November 2009

Published in International Journal of Mathematics and Mathematical Sciences (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://eudml.org/doc/45733

Mathematics Subject Classification ID

Probability distributions: general theory (60E05) Limit theorems in probability theory (60F99)

Review text

Summary: We consider the asymptotic behavior of a probability density function for the sum of any two lognormally distributed random variables that are nontrivially correlated. We show that both the left and right tails can be approximated by some simple functions. Furthermore, the same techniques are applied to determine the tail probability density function for a ratio statistic, and for a sum with more than two lognormally distributed random variables under some stricter conditions. The results yield new insights into the problem of characterization for a sum of lognormally distributed random variables and demonstrate that there is a need to revisit many existing approximation methods.

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Cited in

(10)

• The sum and difference of two lognormal random variables
• Discrete sums of geometric Brownian motions, annuities and Asian options
• On the tail probabilities of aggregated lognormal random fields with small noise
• Implied volatility of basket options at extreme strikes
• Patient observers and non-perturbative infrared dynamics in inflation
• Approximating the Laplace transform of the sum of dependent lognormals
• Distribution of correlated lognormal random sum
• The Logarithm of the Sum of Two Correlated Log-Normal Variates
• Tail behavior of sums and differences of log-normal random variables
• Asymptotics of sums of lognormal random variables with Gaussian copula

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