K.U.Leuven - Departement Toegepaste Economische Wetenschappen
DTEW Research Report 9914 pages:1-34
In most practical cases, it is impossible to find an explicit expression for the distribution function of the present value of a sequence cash flows that are discounted using some given stochastic return process. In this paper, we present an easy computable approximation for this distribution function. The approximation is a distribution function which is, in the sense of convex order, an upper bound for the original distribution function.