TAIL BEHAVIOR OF STOPPED LÉVY PROCESSES WITH MARKOV MODULATION
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This article concerns the tail probabilities of a light-tailed Markov-modulated Lévy process stopped at a state-dependent Poisson rate. The tails are shown to decay exponentially at rates given by the unique positive and negative roots of the spectral abscissa of a certain matrix-valued function. We illustrate the use of our results with an application to the stationary distribution of wealth in a simple economic model in which agents with constant absolute risk aversion are subject to random mortality and income fluctuation.
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1983 ◽
Vol 38
(1)
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pp. 205-212
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2003 ◽
Vol 33
(1)
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pp. 1-28
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