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Withdrawal Success Estimation

Author

Listed:
  • HAYDEN BROWN

    (Department of Mathematics & Statistics, University of Nevada, Reno, 1664 N. Virginia Street, Reno, NV 89557, United States)

Abstract

Given an asset having a geometric Lévy alpha-stable wealth process, a log-Lévy alpha-stable lower bound is constructed for the terminal wealth of a regular investing schedule. Using a transformation, the lower bound is applied to a schedule of withdrawals occurring after an initial investment. As a result, an upper bound is described on the probability to complete a given schedule of withdrawals. For withdrawals of a constant amount at equidistant times, necessary conditions are given on the initial investment and parameters of the wealth process such that k withdrawals can be made with 95% confidence. When withdrawing from an annually rebalanced portfolio maintaining 100p% in the S&P Composite Index and 100(1−p)% in inflation protected bonds, the initial investment must be at least k times the amount of each withdrawal for p∈{0.4,0.6,1} and 2≤k≤14.

Suggested Citation

  • Hayden Brown, 2023. "Withdrawal Success Estimation," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 26(04n05), pages 1-30, August.
    • Handle: RePEc:wsi:ijtafx:v:26:y:2023:i:04n05:n:s0219024923500140
    DOI: 10.1142/S0219024923500140
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