Exit Times for a Discrete Markov Additive Process

Abstract

In this paper, we consider (upward skip-free) discrete-time and discrete-space Markov additive chains (MACs) and develop the theory for the so-called \(\widetilde{{\textbf {W}}}\) and \(\widetilde{{\textbf {Z}}}\) scale matrices, which are shown to play a vital role in the determination of a number of exit problems and related fluctuation identities. The theory developed in this fully discrete set-up follows similar lines of reasoning as the analogous theory for Markov additive processes in continuous time and is exploited to obtain the probabilistic construction of the scale matrices, identify the form of the generating function and produce a simple recursion relation for \(\widetilde{{\textbf {W}}}\), as well as its connection with the so-called occupation mass formula. In addition to the standard one- and two-sided exit problems (upwards and downwards), we also derive distributional characteristics for a number of quantities related to the one- and two-sided ‘reflected’ processes.