Tail indices for $$\mathbf{A}\mathbf{X}+\mathbf{B}$$ A X + B Recursion with Triangular Matrices

Muneya Matsui () and Witold Świątkowski ()
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Muneya Matsui: Nanzan University
Witold Świątkowski: University of Wrocław

Journal of Theoretical Probability, 2021, vol. 34, issue 4, 1831-1869

Abstract: Abstract We study multivariate stochastic recurrence equations (SREs) with triangular matrices. If coefficient matrices of SREs have strictly positive entries, the classical Kesten result says that the stationary solution is regularly varying and the tail indices are the same in all directions. This framework, however, is too restrictive for applications. In order to widen applicability of SREs, we consider SREs with triangular matrices and we prove that their stationary solutions are regularly varying with component-wise different tail exponents. Several applications to GARCH models are suggested.

Keywords: Stochastic recurrence equation; Kesten’s theorem; Regular variation; Multivariate GARCH(1; 1) processes; Triangular matrices; Primary 60G10; 60G70; Secondary 62M10; 60H25 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10959-020-01019-8

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