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Discrete and Continuous Time Modulated Random Walks with Heavy-Tailed Increments

Author

Listed:
  • Serguei Foss

    (Heriot-Watt University)

  • Takis Konstantopoulos

    (Heriot-Watt University)

  • Stan Zachary

    (Heriot-Watt University)

Abstract

We consider a modulated process S which, conditional on a background process X, has independent increments. Assuming that S drifts to −∞ and that its increments (jumps) are heavy-tailed (in a sense made precise in the paper), we exhibit natural conditions under which the asymptotics of the tail distribution of the overall maximum of S can be computed. We present results in discrete and in continuous time. In particular, in the absence of modulation, the process S in continuous time reduces to a Lévy process with heavy-tailed Lévy measure. A central point of the paper is that we make full use of the so-called “principle of a single big jump” in order to obtain both upper and lower bounds. Thus, the proofs are entirely probabilistic. The paper is motivated by queueing and Lévy stochastic networks.

Suggested Citation

  • Serguei Foss & Takis Konstantopoulos & Stan Zachary, 2007. "Discrete and Continuous Time Modulated Random Walks with Heavy-Tailed Increments," Journal of Theoretical Probability, Springer, vol. 20(3), pages 581-612, September.
    • Handle: RePEc:spr:jotpro:v:20:y:2007:i:3:d:10.1007_s10959-007-0081-2
    DOI: 10.1007/s10959-007-0081-2
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    References listed on IDEAS

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    1. Veraverbeke, N., 1977. "Asymptotic behaviour of Wiener-Hopf factors of a random walk," Stochastic Processes and their Applications, Elsevier, vol. 5(1), pages 27-37, February.
    2. Hansen, Niels Richard & Jensen, Anders Tolver, 2005. "The extremal behaviour over regenerative cycles for Markov additive processes with heavy tails," Stochastic Processes and their Applications, Elsevier, vol. 115(4), pages 579-591, April.
    3. Maulik, Krishanu & Zwart, Bert, 2006. "Tail asymptotics for exponential functionals of Lévy processes," Stochastic Processes and their Applications, Elsevier, vol. 116(2), pages 156-177, February.
    4. Embrechts, P. & Veraverbeke, N., 1982. "Estimates for the probability of ruin with special emphasis on the possibility of large claims," Insurance: Mathematics and Economics, Elsevier, vol. 1(1), pages 55-72, January.
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    Cited by:

    1. van Eekelen, Wouter, 2023. "Distributionally robust views on queues and related stochastic models," Other publications TiSEM 9b99fc05-9d68-48eb-ae8c-9, Tilburg University, School of Economics and Management.
    2. Jaap Geluk & Qihe Tang, 2009. "Asymptotic Tail Probabilities of Sums of Dependent Subexponential Random Variables," Journal of Theoretical Probability, Springer, vol. 22(4), pages 871-882, December.

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