Notes 9 : Infinitely divisible and stable laws

Similar documents
18.175: Lecture 13 Infinite divisibility and Lévy processes

Lecture 19 : Brownian motion: Path properties I

Notes 1 : Measure-theoretic foundations I

18.175: Lecture 17 Poisson random variables

Notes 18 : Optional Sampling Theorem

Notes 15 : UI Martingales

18.175: Lecture 15 Characteristic functions and central limit theorem

Lecture Characterization of Infinitely Divisible Distributions

Exercises in Extreme value theory

On the Breiman conjecture

Continuous Random Variables

1* (10 pts) Let X be a random variable with P (X = 1) = P (X = 1) = 1 2

Chapter 5 continued. Chapter 5 sections

f (1 0.5)/n Z =

the convolution of f and g) given by

Chapter 3 sections. SKIP: 3.10 Markov Chains. SKIP: pages Chapter 3 - continued

Notes 5 : More on the a.s. convergence of sums

Notes 6 : First and second moment methods

Asymptotic Statistics-III. Changliang Zou

STA205 Probability: Week 8 R. Wolpert

Notes 13 : Conditioning

IEOR 3106: Introduction to Operations Research: Stochastic Models. Fall 2011, Professor Whitt. Class Lecture Notes: Thursday, September 15.

Chapter 5. Chapter 5 sections

Lecture 1: August 28

Notes 19 : Martingale CLT

Infinitely divisible distributions and the Lévy-Khintchine formula

Chapter 3 sections. SKIP: 3.10 Markov Chains. SKIP: pages Chapter 3 - continued

Lecture 18 : Ewens sampling formula

n! (k 1)!(n k)! = F (X) U(0, 1). (x, y) = n(n 1) ( F (y) F (x) ) n 2

1 Review of Probability

X n D X lim n F n (x) = F (x) for all x C F. lim n F n(u) = F (u) for all u C F. (2)

Miscellaneous Errors in the Chapter 6 Solutions

Convergence in Distribution

Math 341: Probability Seventeenth Lecture (11/10/09)

t x 1 e t dt, and simplify the answer when possible (for example, when r is a positive even number). In particular, confirm that EX 4 = 3.

Stochastic Convergence, Delta Method & Moment Estimators

P (A G) dp G P (A G)

S6880 #7. Generate Non-uniform Random Number #1

Continuous Random Variables and Continuous Distributions

Jim Lambers MAT 169 Fall Semester Lecture 6 Notes. a n. n=1. S = lim s k = lim. n=1. n=1

2016 Final for Advanced Probability for Communications

18.175: Lecture 8 Weak laws and moment-generating/characteristic functions

Probability Theory I: Syllabus and Exercise

18.175: Lecture 14 Infinite divisibility and so forth

Fourier Transforms of Measures

or E ( U(X) ) e zx = e ux e ivx = e ux( cos(vx) + i sin(vx) ), B X := { u R : M X (u) < } (4)

MATH3283W LECTURE NOTES: WEEK 6 = 5 13, = 2 5, 1 13

Math 832 Fall University of Wisconsin at Madison. Instructor: David F. Anderson

Jump-type Levy Processes

Uses of Asymptotic Distributions: In order to get distribution theory, we need to norm the random variable; we usually look at n 1=2 ( X n ).

Poisson random measure: motivation

On Optimal Stopping Problems with Power Function of Lévy Processes

BMIR Lecture Series on Probability and Statistics Fall 2015 Discrete RVs

If g is also continuous and strictly increasing on J, we may apply the strictly increasing inverse function g 1 to this inequality to get

Ernesto Mordecki 1. Lecture III. PASI - Guanajuato - June 2010

Lecture The Sample Mean and the Sample Variance Under Assumption of Normality

Final Examination. STA 711: Probability & Measure Theory. Saturday, 2017 Dec 16, 7:00 10:00 pm

1 Solution to Problem 2.1

Math Spring Practice for the Second Exam.

Lecture 5: Moment generating functions

Expectation, variance and moments

8 Laws of large numbers

Statistics STAT:5100 (22S:193), Fall Sample Final Exam B

1. Stochastic Processes and filtrations

March 10, 2017 THE EXPONENTIAL CLASS OF DISTRIBUTIONS

Econ Lecture 3. Outline. 1. Metric Spaces and Normed Spaces 2. Convergence of Sequences in Metric Spaces 3. Sequences in R and R n

Lecture 19 : Chinese restaurant process

Random Variables. Random variables. A numerically valued map X of an outcome ω from a sample space Ω to the real line R

p. 6-1 Continuous Random Variables p. 6-2

COMPSCI 240: Reasoning Under Uncertainty

Asymptotic distribution of the sample average value-at-risk in the case of heavy-tailed returns

THE LINDEBERG-FELLER CENTRAL LIMIT THEOREM VIA ZERO BIAS TRANSFORMATION

SUFFICIENT STATISTICS

PROBABILITY: LIMIT THEOREMS II, SPRING HOMEWORK PROBLEMS

ON THE INFINITE DIVISIBILITY OF PROBABILITY DISTRIBUTIONS WITH DENSITY FUNCTION OF NORMED PRODUCT OF CAUCHY DENSITIES

MAS113 Introduction to Probability and Statistics. Proofs of theorems

S n = x + X 1 + X X n.

Mathematical Statistics 1 Math A 6330

Stat410 Probability and Statistics II (F16)

Brief Review of Probability

MAS223 Statistical Inference and Modelling Exercises

Moments. Raw moment: February 25, 2014 Normalized / Standardized moment:

Grading: 1, 2, 3, 4, 5 (each 8 pts) e ita R. e itx dµ(x)dt = 1 2T. cos(t(x a))dt dµ(x) T (x a) 1 2T. cos(t(x a))dt =

Random Bernstein-Markov factors

Chapter 4. Chapter 4 sections

Notes 20 : Tests of neutrality

Mathematical Statistics

1 Presessional Probability

PROBABILITY: LIMIT THEOREMS II, SPRING HOMEWORK PROBLEMS

1 Probability and Random Variables

Math 576: Quantitative Risk Management

1. Compute the c.d.f. or density function of X + Y when X, Y are independent random variables such that:

IEOR 4703: Homework 2 Solutions

Brownian Motion and Stochastic Calculus

Exponential Distribution and Poisson Process

Simulation. Alberto Ceselli MSc in Computer Science Univ. of Milan. Part 4 - Statistical Analysis of Simulated Data

A generalization of Strassen s functional LIL

Central limit theorem. Paninski, Intro. Math. Stats., October 5, probability, Z N P Z, if

Exercises and Answers to Chapter 1

1.1 Review of Probability Theory

Transcription:

Notes 9 : Infinitely divisible and stable laws Math 733 - Fall 203 Lecturer: Sebastien Roch References: [Dur0, Section 3.7, 3.8], [Shi96, Section III.6]. Infinitely divisible distributions Recall: EX 9. (Normal distribution) Let Z, Z 2 N(0, ) independent then and Z + Z 2 N(0, 2). φ Z +Z 2 (t) = φ Z (t)φ Z2 (t) = e t2, EX 9.2 (Poisson distribution) Similarly, if Y, Y 2 Poi(λ) independent then and Y + Y 2 Poi(2). φ Y +Y 2 (t) = φ Y (t)φ Y2 (t) = exp ( 2λ(e it ) ), DEF 9.3 (Infinitely divisible distributions) A DF F is infinitely divisible if there for all n, there is a DF F n such that Z = d X n, + + X n,n, where Z F and the X n,k s are IID with X n,k F n for all k n. THM 9.4 A DF F can be a limit in distribution of IID triangular arrays if and only if F is infinitely divisible. Z n = X n + + X n,n, Proof: One direction is obvious. If F is infinitely divisible, then we can make Z = d Z n for all n with Z F.

Lecture 9: Infinitely divisible and stable laws 2 For the other direction, assume Z n Z. Write Z 2n = (X 2n, + + X 2n,n ) + (X 2n,n+ + + X 2n,2n ) = Y n + Y n. Clearly Y n and Y n are independent and identically distributed. We claim further that they are tight. Indeed P[Y n > y] 2 = P[Y n > y]p[y n > y] P [Z 2n > 2y] and Z n converges to a probability distribution by assumption. Now take a subsequence of {Y n } so that Y nk Y (and hence Y n k Y ) then, using CFs, Y nk + Y n k Y + Y, where Y, Y are independent. Since Z n Z it follows that Z = d Y + Y. EX 9.5 (Normal distribution) To test whether a DF F is infinitely divisible, it suffices to check that (φ F (t)) /n is a CF, n. In the N(0, ) case, which is the CF of a N(0, n). (φ F (t)) /n = e t2 /(2n), EX 9.6 (Poisson distribution) Similarly, in the F Poi(λ) case, is the CF of a Poi(λ/n). (φ F (t)) /n = exp(λ(e it )/n), EX 9.7 (Gamma distribution) Let F be a Gamma(α, β) distribution, that is, with density f(x) = xα e x/β Γ(α)β α x 0, for α, β > 0, and CF Hence φ(t) = (φ(t)) /n = which is the CF of a Gamma(α/n, β). ( iβt) α. ( iβt) α/n,

Lecture 9: Infinitely divisible and stable laws 3 It is possible to characterize all infinitely divisble distributions. We quote the following without proof. See Breiman s or Feller s books. THM 9.8 (Lévy-Khinchin Theorem) A DF F is infinitely divisible if and only if φ F (t) is of the form e ψ(t) with ψ(t) = itβ t2 σ 2 + ( 2 + e itx itx ) + x 2 µ(dx), where β R, σ 2 0, and µ is a measure on R with µ({0}) = 0 and x 2 +x 2 µ(dx) < +. (The previous ratio is so any finite measure will work.) EX 9.9 (Normal distribution) Taking β = 0, σ 2 =, and µ 0 gives a N(0, ). EX 9.0 (Poisson distribution) Taking σ 2 = 0, µ({}) = λ, and β = x µ(dx) +x 2 gives a Poi(λ). EX 9. (Compound Poisson distribution) Let W be a RV with CF φ(t). A compound Poisson RV with parameters λ and φ is Z = N W i, where the W i s are IID with CF φ and N Poi(λ). By direct calculation, e λ λ n φ Z (t) = φ(t) n = exp(λ(φ(t) )). n! n=0 i= Z is infinitely divisible for the same reason that the Poisson distribution is. Taking σ 2 = 0, µ({}) = λ PM of Z, and β = x µ(dx) gives φ +x 2 Z. (The previous integral exists for PMs because when x is large the ratio is essentially /x.) 2 Stable laws An important special case of infinitely divisible distributions arises when the triangular array takes the special form X k, n, k,, up to ormalization that depends on n. E.g., the simple form of the CLT. DEF 9.2 A DF F is stable if for all n Z = d n i= W i b n, where Z, {W i } i F and the W i s are independent and > 0, b n R are constants.

Lecture 9: Infinitely divisible and stable laws 4 Note that this applies to Gaussians but not to Poisson variables (which are integervalued). THM 9.3 Let F be a DF and Z F. A necessary and sufficient condition for the existence of constants > 0, b n such that Z n = S n b n where S n = n i= X i with X i s IID is that F is stable. Proof: We prove the non-trivial direction. Assume as above. Letting and Then Z n = S n b n S () n = i n S (2) n = n+ i 2n ({ } S n () b n Z 2n = a + n a 2n X i, X i. { S (2) n b n } 2b n b 2n The LHS and both terms in bracket converge weakly. One has to show that the constants converge. LEM 9.4 (Convergence of types) If W n W and there are constants α n > 0, β n so that W n = α n W n + β n W where W and W are nondegenerate, then there are constants α and β so that α n α and β n β. See [D] for proof. It requires an exercise done in homework. Finally there is also a characterization for stable laws. THM 9.5 (Lévy-Khinchin Representation) A DF F is stable if and only if the CF φ F (t) is of the form e ψ(t) with ψ(t) = itβ d t α ( + iκ sgn(t)g(t, α)), where 0 < α 2, β R, d 0, κ, and { tan G(t, α) = 2πα if α, 2 π log t if α =. The parameter α is called the index of the stable law. ).

Lecture 9: Infinitely divisible and stable laws 5 EX 9.6 Taking α = 2 gives a Gaussian. Note that a DF is symmetric if and only if or, in other words, φ(t) is real. φ(t) = E[e itx ] = E[e itx ] = φ(t), THM 9.7 (Lévy-Khinchin representation: Symmetric case) A DF F is symmetric and stable if and only if its CF is of the form e d t α where 0 < α 2 and d 0. The parameter α is called the index of the stable law. α = 2 is the Gaussian case. α = is the Cauchy case. 2. Domain of attraction DEF 9.8 (Domain of attraction) A DF F is in the domain of attraction of a DF G if there are constants > 0 and b n such that S n b n where Z G and S n = k n X k, with X k F and independent. DEF 9.9 (Slowly varying function) A function L is slowly varying if for all t > 0 L(tx) lim x + L(x) =. EX 9.20 If L(t) = log t then L(tx) L(x) = log t + log x log x. On the other hand, if L(t) = t ε with ε > 0 then L(tx) L(x) = tε x ε x ε t ε. THM 9.2 Suppose (X n ) n are IID with a distribution that satisfies

Lecture 9: Infinitely divisible and stable laws 6. lim x P[X > x]/p[ X > x] = θ [0, ] 2. P[ X > x] = x α L(x), where 0 < α < 2 and L is slowly varying. Let S n = k n X k, = inf{x : P[ X > x] n } (Note that is roughly of order n /α.) and Then where Z has an α-stable distribution. b n = ne[x X ]. S n b n This condition is also necessary. Note also that this extends in some sense the CLT to some infinite variance cases when α = 2. See the infinite variance example in Section 3.4 on [D]. EX 9.22 (Cauchy distribution) Let (X n ) n be IID with a density symmetric about 0 and continuous and positive at 0. Then ( + + ) a Cauchy distribution. n X X n Clearly θ = /2. Moreover P[/X > x] = P[0 < X < x ] = x 0 f(y)dy f(0)/x, and similarly for P[/X < x]. So α =. Clearly b n = 0 by symmetry. Finally 2f(0)n. EX 9.23 (Centering constants) Suppose (X n ) n are IID with for x > P[X > x] = θx α, P[X < x] = ( θ)x α, where 0 < α < 2. In this case = n /α and n /α cn α > b n = n (2θ )αx α dx cn log n α = cn /α α <.

Lecture 9: Infinitely divisible and stable laws 7 References [Dur0] Rick Durrett. Probability: theory and examples. Cambridge Series in Statistical and Probabilistic Mathematics. Cambridge University Press, Cambridge, 200. [Shi96] A. N. Shiryaev. Probability, volume 95 of Graduate Texts in Mathematics. Springer-Verlag, New York, 996.