Paper 2, Section II, J

Applied Probability | Part II, 2009

Let X1,X2,X_{1}, X_{2}, \ldots, be a sequence of independent, identically distributed positive random variables, with a common probability density function f(x),x>0f(x), x>0. Call XnX_{n} a record value if Xn>max{X1,,Xn1}X_{n}>\max \left\{X_{1}, \ldots, X_{n-1}\right\}. Consider the sequence of record values

V0=0,V1=X1,,Vn=Xin,V_{0}=0, V_{1}=X_{1}, \ldots, V_{n}=X_{i_{n}},

where

in=min{i1:Xi>Vn1},n>1.i_{n}=\min \left\{i \geqslant 1: X_{i}>V_{n-1}\right\}, n>1 .

Define the record process (Rt)t0\left(R_{t}\right)_{t \geqslant 0} by R0=0R_{0}=0 and

Rt=max{n1:Vn<t},t>0R_{t}=\max \left\{n \geqslant 1: V_{n}<t\right\}, \quad t>0

(a) By induction on nn, or otherwise, show that the joint probability density function of the random variables V1,,VnV_{1}, \ldots, V_{n} is given by:

fV1,,Vn(x1,,xn)=f(x1)f(x2)1F(x1)××f(xn)1F(xn1),f_{V_{1}, \ldots, V_{n}}\left(x_{1}, \ldots, x_{n}\right)=f\left(x_{1}\right) \frac{f\left(x_{2}\right)}{1-F\left(x_{1}\right)} \times \ldots \times \frac{f\left(x_{n}\right)}{1-F\left(x_{n-1}\right)},

where F(x)=0xf(y)dyF(x)=\int_{0}^{x} f(y) \mathrm{d} y is the cumulative distribution function for f(x)f(x).

(b) Prove that the random variable RtR_{t} has a Poisson distribution with parameter Λ(t)\Lambda(t) of the form

Λ(t)=0tλ(s)ds,\Lambda(t)=\int_{0}^{t} \lambda(s) \mathrm{d} s,

and determine the 'instantaneous rate' λ(s)\lambda(s).

[Hint: You may use the formula

P(Rt=k)=P(Vkt<Vk+1)=0t0t1{t1<<tk}fV1,,Vk(t1,,tk)×P(Vk+1>tV1=t1,,Vk=tk)j=1k dtj,\begin{aligned} &\mathbb{P}\left(R_{t}=k\right)=\mathbb{P}\left(V_{k} \leqslant t<V_{k+1}\right) \\ &=\int_{0}^{t} \ldots \int_{0}^{t} \mathbf{1}_{\left\{t_{1}<\ldots<t_{k}\right\}} f_{V_{1}, \ldots, V_{k}}\left(t_{1}, \ldots, t_{k}\right) \\ &\quad \times \mathbb{P}\left(V_{k+1}>t \mid V_{1}=t_{1}, \ldots, V_{k}=t_{k}\right) \prod_{j=1}^{k} \mathrm{~d} t_{j}, \end{aligned}

for any k1.]k \geqslant 1 .]

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