Martingales, scale functions and stochastic life annuities: A note

DOI10.1016/S0167-6687(98)00032-8MaRDI QIDQ1293823zbMATH OpenOpenAlexFDO

Authors Moshe Arye Milevsky

Publication date 31 January 2000

Published in Insurance Mathematics \& Economics (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/s0167-6687(98)00032-8

zbMATH Keywords

martingalesscale functionstochastic perpetuities

Mathematics Subject Classification ID

Applications of Brownian motions and diffusion theory (population genetics, absorption problems, etc.) (60J70)

Review text

Consider the process \(Y_t = \int_0^t \alpha(s) \exp(-\sigma W_s) ds\) where \(W\) is Brownian motion and \(\alpha\geq 0\) is a smooth function. This paper gives an expression for the distribution function of \(Y_\infty\) in terms of the solution \(F\) of a diffusion PDE involving \(\alpha\). For \(\alpha(s) = \exp(-\delta s)\), this yields a simple proof of a result due to \textit{D. Dufresne} [Scand. Actuarial J. 1990, No. 1/2, 39-79 (1990; Zbl 0743.62101)] on stochastic perpetuities. The idea behind the general result is to transform \((t,W_t, Y_t)\) into a Markov process \((U_t)\) and then find a function \(F\) such that \(F(t,U_t)\) is a local martingale.

Recommendations

• Stochastic life annuities
• A note on some new perpetuities
• Properties of perpetual integral functionals of Brownian motion with drift
• Perpetual integral functionals as hitting and occupation times
• scientific article; zbMATH DE number 1639861

Cites work

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Cited in

(7)

• Bounds for present value functions with stochastic interest rates and stochastic volatility.
• Properties of perpetual integral functionals of Brownian motion with drift
• scientific article; zbMATH DE number 1639861 (Why is no real title available?)
• A note on some new perpetuities
• Convergence of Disturbed Martingales and a Stochastic Model for Annuity Funds
• “Stochastic Annuities,” Daniel Dufresne, January 2007
• Ruined moments in your life: how good are the approximations?

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