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Tails of bivariate stochastic recurrence equation with triangular matrices

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  • Damek, Ewa
  • Matsui, Muneya

Abstract

We study bivariate stochastic recurrence equations with triangular matrix coefficients and we characterize the tail behavior of their stationary solutions W=(W1,W2). Recently it has been observed that W1,W2 may exhibit regularly varying tails with different indices, which is in contrast to well-known Kesten-type results. However, only partial results have been derived. Under typical “Kesten–Goldie” and “Grey” conditions, we completely characterize tail behavior of W1,W2. The tail asymptotics we obtain has not been observed in previous settings of stochastic recurrence equations.

Suggested Citation

  • Damek, Ewa & Matsui, Muneya, 2022. "Tails of bivariate stochastic recurrence equation with triangular matrices," Stochastic Processes and their Applications, Elsevier, vol. 150(C), pages 147-191.
    • Handle: RePEc:eee:spapps:v:150:y:2022:i:c:p:147-191
    DOI: 10.1016/j.spa.2022.04.008
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    References listed on IDEAS

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    5. Sun, Pengfei & Zhou, Chen, 2014. "Diagnosing the distribution of GARCH innovations," Journal of Empirical Finance, Elsevier, vol. 29(C), pages 287-303.
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