Limit theorems for discounted convergent perpetuities

TL;DR

This paper establishes limit theorems for convergent perpetuities as the discount factor approaches one, providing insights into actuarial models near a risk-free scenario.

Contribution

It introduces strong law of large numbers, central limit theorem, and law of the iterated logarithm for perpetuities in the near risk-free limit.

Findings

Proves a strong law of large numbers for the perpetuities.

Establishes a functional central limit theorem as the discount factor approaches one.

Derives a law of the iterated logarithm in the same limit.

Abstract

Let $(\xi_1, \eta_1)$, $(\xi_2, \eta_2),\ldots$ be independent identically distributed $\mathbb{R}^2$-valued random vectors. We prove a strong law of large numbers, a functional central limit theorem and a law of the iterated logarithm for convergent perpetuities $\sum_{k\geq 0}b^{\xi_1+\ldots+\xi_k}\eta_{k+1}$ as $b\to 1-$. Under the standard actuarial interpretation, these results correspond to the situation when the actuarial market is close to the customer-friendly scenario of no risk.