Preprint Review Version 1 Preserved in Portico This version is not peer-reviewed

Valuing the Future, Discounting in Random Environments: A Review

Version 1 : Received: 12 November 2021 / Approved: 16 November 2021 / Online: 16 November 2021 (13:50:41 CET)

A peer-reviewed article of this Preprint also exists.

Masoliver, J.; Montero, M.; Perelló, J.; Farmer, J.D.; Geanakoplos, J. Valuing the Future and Discounting in Random Environments: A Review. Entropy 2022, 24, 496. https://doi.org/10.3390/e24040496 Masoliver, J.; Montero, M.; Perelló, J.; Farmer, J.D.; Geanakoplos, J. Valuing the Future and Discounting in Random Environments: A Review. Entropy 2022, 24, 496. https://doi.org/10.3390/e24040496

Journal reference: Entropy 2022, 24, 496
DOI: 10.3390/e24040496

Abstract

We address the process of discounting in random environments which allows to value the far future in economic terms. We review several approaches to the problem regarding different well-established stochastic market dynamics in the continuous-time context and include the Feynman-Kac approach. We also review the relation between bond pricing theory and discount and introduce the market price of risk and the risk neutral measures from an intuitive point of view devoid of excessive formalism. We provide the discount for each economic model and discuss their key results. We finally present a summary of our previous empirical studies on several countries of the long-run discount problem.

Keywords

stochastic processes; finance; interest rates

Subject

MATHEMATICS & COMPUTER SCIENCE, Probability and Statistics

Comments (0)

We encourage comments and feedback from a broad range of readers. See criteria for comments and our diversity statement.

Leave a public comment
Send a private comment to the author(s)
Views 0
Downloads 0
Comments 0
Metrics 0


×
Alerts
Notify me about updates to this article or when a peer-reviewed version is published.

We use cookies on our website to ensure you get the best experience.
Read more about our cookies here.