March 2013 A time-homogeneous diffusion model with tax
Bin Li, Qihe Tang, Xiaowen Zhou
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J. Appl. Probab. 50(1): 195-207 (March 2013). DOI: 10.1239/jap/1363784433

Abstract

We study the two-sided exit problem of a time-homogeneous diffusion process with tax payments of loss-carry-forward type and obtain explicit formulae for the Laplace transforms associated with the two-sided exit problem. The expected present value of tax payments until default, the two-sided exit probabilities, and, hence, the nondefault probability with the default threshold equal to the lower bound are solved as immediate corollaries. A sufficient and necessary condition for the tax identity in ruin theory is discovered.

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Bin Li. Qihe Tang. Xiaowen Zhou. "A time-homogeneous diffusion model with tax." J. Appl. Probab. 50 (1) 195 - 207, March 2013. https://doi.org/10.1239/jap/1363784433

Information

Published: March 2013
First available in Project Euclid: 20 March 2013

zbMATH: 1271.62246
MathSciNet: MR3076781
Digital Object Identifier: 10.1239/jap/1363784433

Subjects:
Primary: 62P05
Secondary: 60G40 , 60J60 , 60K15 , 91B30

Keywords: diffusion , hitting time , Laplace transform , Markov property , tax , two-sided exit problem

Rights: Copyright © 2013 Applied Probability Trust

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Vol.50 • No. 1 • March 2013
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