Stochastic Compounding Models for Continuous Uniform Cash Flows Arising in Risk Management
Journal of Statistics and Management Systems, Forthcoming
Posted: 24 Apr 2008 Last revised: 1 May 2008
This paper investigates the conditions under which zero unimodality is introduced into stochastic future value distributions for continuous uniform cash flows, and discusses the associated moments. The distribution of a future value generated from such cash flows is shown to be far more complicated than hitherto thought. In many situations, the statistical evidence suggesting there is potential to generate realistic future value is contradictory. These points are illustrated using a number of important areas of practical application in risk management.
Keywords: Unimodality, future value distributions, risk management
JEL Classification: C60
Suggested Citation: Suggested Citation