Closed-Form Valuation of Discounted Cash Flows with Finite Poisson Arrivals in a Finite Horizon

This paper derives a closed-form expression for the expected discounted value of aggregate cash flows when arrival times follow a Poisson process but both the time horizon and the number of arrivals are finite. The result provides a tractable analytical formula for the expected discounted sum under simultaneous constraints on time and arrival counts. We show that the expression converges to the well-known infinite-horizon and infinite-arrival results as limiting cases. Numerical illustrations demonstrate the behavior of the formula under different parameter values. The result can be interpreted as the valuation of a discounted compound Poisson process with finite constraints and may be useful in stochastic modeling and risk-analysis applications. The proposed formula provides a simple analytical tool for evaluating discounted losses or revenues in finite risk portfolios.

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Publication Details

Journal
Risks
Published
2026-04-16
DOI
https://doi.org/10.3390/risks14040090
Primary Topic
Stochastic processes and financial applications
Type
article
Field-Weighted Citation Impact
0.00

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article

Closed-Form Valuation of Discounted Cash Flows with Finite Poisson Arrivals in a Finite Horizon

Yuto Kitamura, Makoto Shimoshimizu, Yuta Kudo, Makoto Goto
Risks
Stochastic processes and financial applications
article

Closed-Form Valuation of Discounted Cash Flows with Finite Poisson Arrivals in a Finite Horizon

Yuto Kitamura, Makoto Shimoshimizu, Yuta Kudo, Makoto Goto
article en

Abstract

This paper derives a closed-form expression for the expected discounted value of aggregate cash flows when arrival times follow a Poisson process but both the time horizon and the number of arrivals are finite. The result provides a tractable analytical formula for the expected discounted sum under simultaneous constraints on time and arrival counts. We show that the expression converges to the well-known infinite-horizon and infinite-arrival results as limiting cases. Numerical illustrations demonstrate the behavior of the formula under different parameter values. The result can be interpreted as the valuation of a discounted compound Poisson process with finite constraints and may be useful in stochastic modeling and risk-analysis applications. The proposed formula provides a simple analytical tool for evaluating discounted losses or revenues in finite risk portfolios.

RisksVol. 14(4)
Tokyo University of Science (JP)
Japan Society for the Promotion of Science
Decent work and economic growth
Openalex Percentile: Top 18%
Stochastic processes and financial applications
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