Tail estimates for stochastic fixed point equations via nonlinear renewal theory

DOI10.1016/J.SPA.2013.04.015MaRDI QIDQ2447717zbMATH OpenOpenAlexFDO

Authors Jeffrey F. Collamore, Anand N. Vidyashankar

Publication date 28 April 2014

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1103.2317

zbMATH Keywords

Cramér-Lundberg theory with stochastic investmentsextremal indexGARCH processesgeometric ergodicityHarris recurrent Markov chainslarge deviationsLetac's principlenonlinear renewal theoryrandom recurrence equationsslowly changing functions

Mathematics Subject Classification ID

Large deviations (60F10) Extreme value theory; extremal stochastic processes (60G70) Random operators and equations (aspects of stochastic analysis) (60H25) Markov chains (discrete-time Markov processes on discrete state spaces) (60J10) Renewal theory (60K05)

Abstract: This paper presents precise large deviation estimates for solutions to stochastic fixed point equations of the type V =_d f(V), where f(v) = Av + g(v) for a random function g(v) = o(v) a.s. as v tends to infinity. Specifically, we provide an explicit characterization of the pair (C,r) in the tail estimate P(V > u) ~ C u^-r as u tends to infinity, and also present a Lundberg-type upper bound of the form P(V > u) <= D(u) u^-r. To this end, we introduce a novel dual change of measure on a random time interval and analyze the path properties, using nonlinear renewal theory, of the Markov chain resulting from the forward iteration of the given stochastic fixed point equation. In the process, we establish several new results in the realm of nonlinear renewal theory for these processes. As a consequence of our techniques, we also establish a new characterization of the extremal index. Finally, we provide some extensions of our methods to Markov-driven sequences.

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Cited in

(14)

• Pointwise estimates for first passage times of perpetuity sequences
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• Stochastic fixed-point equation and local dependence measure
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• On the Kesten-Goldie constant
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• Implicit renewal theory and tails of solutions of random equations

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