On the relation between the distributions of stopping time and stopped sum with applications

Details On the relation between the distributions of stopping time and stopped sum with applications On the relation between the distributions of stopping time and stopped sum with applications

2010-07-31

arxiv.org/abs/1008.0116v2

Mathematics

Statistics Theory

18 pages, 4 figures

Scientific paper

Let $T\$ be a stopping time associated with a sequence of independent random variables $Z_{1},Z_{2},...$ . By applying a suitable change in the probability measure we present relations between the moment or probability generating functions of the stopping time $T$ and the stopped sum $%S_{T}=Z_{1}+Z_{2}+...+Z_{T}$. These relations imply that, when the distribution of $S_{T}$\ is known, then the distribution of $T$\ is also known and vice versa. Applications are offered in order to illustrate the applicability of the main results, which also have independent interest. In the first one we consider a random walk with exponentially distributed up and down steps and derive the distribution of its first exit time from an interval $(-a,b).$ In the second application we consider a series of samples from a manufacturing process and we let $Z_{i},i\geq 1$, denoting the number of non-conforming products in the $i$-th sample. We derive the joint distribution of the random vector $(T,S_{T})$, where $T$ is the waiting time until the sampling level of the inspection changes based on a $k$-run switching rule. Finally, we demonstrate how the joint distribution of $%(T,S_{T})$ can be used for the estimation of the probability $p$ of an item being defective, by employing an EM algorithm.

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