Tail estimates for stochastic fixed point equations via nonlinear renewal theory

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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)~Cu^{-r} as u tends to infinity, and also present a corresponding Lundberg-type upper bound. 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 processes.
TidsskriftStochastic Processes and Their Applications
Udgave nummer9
Sider (fra-til)3378-3429
StatusUdgivet - 2013

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