Renorming divergent perpetuities

DOI10.3150/10-BEJ297MaRDI QIDQ638760zbMATH OpenOpenAlexFDO

Authors Jacek Wesołowski, Paweł Hitczenko

Publication date 14 September 2011

Published in Bernoulli (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1107.2753

zbMATH Keywords

convergence in distributionperpetuity

Mathematics Subject Classification ID

Central limit and other weak theorems (60F05) Sums of independent random variables; random walks (60G50)

Abstract: We consider a sequence of random variables $(R_n)$ defined by the recurrence $R_n=Q_n+M_n{R}_{n-1}$, $nge1$, where $R_0$ is arbitrary and $(Q_n,M_n)$, $nge1$, are i.i.d. copies of a two-dimensional random vector $(Q,M)$, and $(Q_n,M_n)$ is independent of $R_{n-1}$. It is well known that if $Eln|M|<0$ and $El{n}^{+}|Q|<infty$, then the sequence $(R_n)$ converges in distribution to a random variable $R$ given by $Rstackreld=su{m}_{k=1}^{infty}{Q}_{k}pro{d}_{j=1}^{k-1}{M}_j$, and usually referred to as perpetuity. In this paper we consider a situation in which the sequence $(R_n)$ itself does not converge. We assume that $Eln|M|$ exists but that it is non-negative and we ask if in this situation the sequence $(R_n)$, after suitable normalization, converges in distribution to a non-degenerate limit.

Review text

Let \((M_k, Q_k)_{k\geq 1}\) be independent copies of a random vector \((M,Q)\) with \(\operatorname{E}\log|M|\geq 0\). Under the latter condition and a couple of technical assumptions, the sequence \[ |X_n|:=\bigg|\sum_{k=1}^nQ_k\prod_{j=1}^{k-1}M_j\bigg| \] diverges to \(\infty\) in probability. The authors exhibit several cases in which \(X_n\), properly normalized and centered, weakly converges to a proper and nondegenerate probability law. A typical additional assumption in the present paper is that either \(|\log M|\) or \(Q\), or both have finite variance. It would be interesting to investigate the problem under less stringent assumptions. Reviewer's remark: The list of references does not contain the paper \textit{A. K. Grincevicius} [Lith. Math. J. 15(1975), 568--579 (1975; Zbl 0372.60045)] which is one of the most important works concerning divergent perpetuities.

Recommendations

• Stability of perpetuities
• Conditions for convergence of random coefficient \(\mathrm{AR}(1)\) processes and perpetuities in higher dimensions
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Cited in

(15)

• A renewal theorem and supremum of a perturbed random walk
• Exact long time behavior of some regime switching stochastic processes
• On the maximum of a perturbed random walk
• Power and exponential moments of the number of visits and related quantities for perturbed random walks
• Conditions for convergence of random coefficient \(\mathrm{AR}(1)\) processes and perpetuities in higher dimensions
• Convergence to the maximum process of a fractional Brownian motion with shot noise
• Functional limit theorems for divergent perpetuities in the contractive case
• Interplay of insurance and financial risks in a discrete-time model with strongly regular variation
• Divergent perpetuities modulated by regime switches
• Renorming volatilities in a family of GARCH models
• Null recurrence and transience of random difference equations in the contractive case
• Distribution tails of a history-dependent random linear recursion
• Random difference equations with subexponential innovations
• Haldane's asymptotics for supercritical branching processes in an iid random environment
• Convergence to type I distribution of the extremes of sequences defined by random difference equation

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