Curve crossing for random walks reflected at their maximum

Central limit and other weak theorems (60F05) Strong limit theorems (60F15) Stopping times; optimal stopping problems; gambling theory (60G40) Martingales with discrete parameter (60G42) Sums of independent random variables; random walks (60G50) Renewal theory (60K05)

Abstract: Let

R_{n} = m a x_{0 l e q j l e q n} S_{j} - S_{n}

be a random walk

S_{n}

reflected in its maximum. Except in the trivial case when

P (X g e 0) = 1

,

R_{n}

will pass over a horizontal boundary of any height in a finite time, with probability 1. We extend this by giving necessary and sufficient conditions for finiteness of passage times of

R_{n}

above certain curved (power law) boundaries, as well. The intuition that a degree of heaviness of the negative tail of the distribution of the increments of

S_{n}

is necessary for passage of

R_{n}

above a high level is correct in most, but not all, cases, as we show. Conditions are also given for the finiteness of the expected passage time of

R_{n}

above linear and square root boundaries.

Review text

Let \(\{S_n\}\) be a random walk and let \(R_n = \max_{1\leq n} S_j- S_n\) be the random walk reflected in its maximum. The main object of the paper is \(\tau_\kappa(r)= \min\{n\geq 1: R_n> rn^\kappa\}\), i.e., the first passage time above a power law boundary. Here \(\kappa\), \(r> 0\) or \(\kappa= 0\), \(r\geq 0\). The results concern, e.g., a.s.-finiteness of \(\tau_\kappa(r)\), existence of moments of the same as well as growth rate results of \(R_n\) itself.

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