Probability – Convergence of Stochastic Processes to Random Walk

limits-and-convergencepr.probabilityrandom walksstochastic-processes

Consider the following random walk $(y_t)_{t \in \mathbb Z_+}$:

$$y_t = y_{t-1} + u_t,\quad (u_t)_{t \in \mathbb Z_+} \overset{iid}{\sim} N(0,1), \quad (t \in \mathbb Z_+)$$

where $y_0, u_1, u_2,…$ are independent.

We know that the process is not stationary and non-ergodic. On the other hand, if $|a|< 1$, we have:
$$y_t = a y_{t-1} + u_t,\quad (u_t)_{t \in \mathbb Z_+} \overset{iid}{\sim} N(0,1), \quad (t \in \mathbb Z_+)$$
is stationary and ergodic. Consider then the following sequence of stochastic processes: let $(a_n)_{n \in \mathbb N}$ be a sequence of real numbers such that, $|a_n|< 1$ for all $n \in \mathbb N$ and $a_n \to 1$, as $n \to \infty$. So, for every $n \in \mathbb N$, define the process $(y_t^n)_{t \in \mathbb Z_+}$ as:
$$y^n_t = a_n y^n_{t-1} + u^n_t,\quad (u^n_t)_{t \in \mathbb Z_+} \overset{iid}{\sim} N(0,1), \quad (t \in \mathbb Z_+)$$

So, I would like to know which metric we can use to determine whether the sequence of stochastic processes $(y^n_t)_{t \in \mathbb{Z}_+}$ converges to the random walk $(y_{t})_{t \in \mathbb{Z}_+}$ defined above.

Best Answer

Assume, naturally, that for each $n$ we have $y_0^n\to y_0$ (as $n\to\infty$) in distribution and $y_0^n$ is independent of $(u^n_t)$.

Then for each $T=0,1,\dots$ we have $Y^n_T\to Y_T$ in distribution, where $Y^n_T:=(y^n_0,\dots,y^n_T)$ and $Y^n_T:=(y_0,\dots,y_T)$. This follows because (say) for all $t=0,1,\dots$ $$y^n_t=a_n^t y^n_0+\sum_{k=1}^t a_n^{t-1-k}u_k$$ (which latter can be proved by induction on $t$), so that for all $T=0,1,\dots$ $$Y^n_T=(y^n_0,\dots,y^n_T)\to\Big(y_0,y_0+u_1,\dots,y_0+\sum_{k=1}^T u_k\Big) =(y_0,\dots,y_T)=Y_T$$ in distribution.

The latter convergence is equivalent to the convergence of $d(P_{Y^n},P_Y)$ to $0$, where $$d(P_{Y^n},P_Y):=\sum_{T=0}^\infty c_T\, \frac{d_{LP}(P_{Y^n_T},P_{Y_T})}{1+d_{LP}(P_{Y^n_T},P_{Y_T})},$$ where (i) $(c_T)_{T=0}^\infty$ is any summable sequence of positive numbers and (ii) $P_{Y^n_T}$ and $P_{Y_T}$ are, respectively, the distributions of $Y^n_T$ and $Y_T$ in $\mathbb R^{T+1}$ and $d_{LP}$ is the Lévy–Prokhorov distance between such distributions.

Any metrics on the sets of all probability distributions over $\mathbb R^T$ can be used here in place of $d_{LP}$. If $y_0$ and the $y_0^n$'s are Gaussian, an especially convenient metric seems to be the Wasserstein $W_2$ metric, for which there is a rather simple explicit expression in the Gaussian case.

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