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Heavy tails for an alternative stochastic perpetuity model

Author

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  • Mikosch, Thomas
  • Rezapour, Mohsen
  • Wintenberger, Olivier

Abstract

In this paper we consider a stochastic model of perpetuity-type. In contrast to the classical affine perpetuity model of Kesten (1973) and Goldie (1991) all discount factors in the model are mutually independent. We prove that the tails of the distribution of this model are regularly varying both in the univariate and multivariate cases. Due to the additional randomness in the model the tails are not pure power laws as in the Kesten–Goldie setting but involve a logarithmic term.

Suggested Citation

  • Mikosch, Thomas & Rezapour, Mohsen & Wintenberger, Olivier, 2019. "Heavy tails for an alternative stochastic perpetuity model," Stochastic Processes and their Applications, Elsevier, vol. 129(11), pages 4638-4662.
    • Handle: RePEc:eee:spapps:v:129:y:2019:i:11:p:4638-4662
    DOI: 10.1016/j.spa.2018.12.008
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