A functional limit theorem for dependent sequences with infinite variance stable limits

DOI10.1214/11-AOP669zbMATH Open1295.60041arXiv1001.1345MaRDI QIDQ690870FDOQ690870

Authors: Bojan Basrak, Danijel Krizmanić, Johan Segers 

Publication date: 29 November 2012

Published in: The Annals of Probability (Search for Journal in Brave)

Abstract: Under an appropriate regular variation condition, the affinely normalized partial sums of a sequence of independent and identically distributed random variables converges weakly to a non-Gaussian stable random variable. A functional version of this is known to be true as well, the limit process being a stable L'{e}vy process. The main result in the paper is that for a stationary, regularly varying sequence for which clusters of high-threshold excesses can be broken down into asymptotically independent blocks, the properly centered partial sum process still converges to a stable L'{e}vy process. Due to clustering, the L'{e}vy triple of the limit process can be different from the one in the independent case. The convergence takes place in the space of c`{a}dl`{a}g functions endowed with Skorohod's $M_1$ topology, the more usual $J_1$ topology being inappropriate as the partial sum processes may exhibit rapid successions of jumps within temporal clusters of large values, collapsing in the limit to a single jump. The result rests on a new limit theorem for point processes which is of independent interest. The theory is applied to moving average processes, squared GARCH(1,1) processes and stochastic volatility models.

Full work available at URL: https://arxiv.org/abs/1001.1345

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zbMATH Keywords

GARCHpoint processmixingregular variationstochastic volatilityfunctional limit theoreminfinite varianceconvergence in distributionstable processmoving averagepartial sumstable limitsdependence sequencespectral process

Mathematics Subject Classification ID

Probability distributions: general theory (60E05) Infinitely divisible distributions; stable distributions (60E07) Point processes (e.g., Poisson, Cox, Hawkes processes) (60G55) Extreme value theory; extremal stochastic processes (60G70) Functional limit theorems; invariance principles (60F17) Stable stochastic processes (60G52)

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