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Math Help - Question Regarding Error Propogation

  1. #1
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    Question Regarding Error Propogation

    An asset start with value V.
    Each year the asset depreciates by (D plus or minus e)% of its remaining value plus or minus.

    The expected value of the asset in year n is V*(1-D)^n.
    What is the expected error for year n?

    I know that if depreciation is contant plus or minus e' the error accumulates as e'*sqrt(n). I am not sure how to calculate error accumulation if the error is a proportion of the remaining asset. Would it be sqrt[(e*V)^2 + (e*V*(1-D))^2 + (e*V*(1-D)^2)^2 + ...] ?
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  2. #2
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    Re: Question Regarding Error Propogation

    Hey bob000.

    Are the models for the errors distributed according to a Brownian motion/Wiener process?
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