Solution
ID: past-exam-of-the-probability-statistics-and-options-ii-course-of-the-university-of-oxford/2009/m/m5/b/i/solution
Past exam of the Probability, statistics and options II course of the University of Oxford 2009 M M5 b i Solution by
Codex 0 2026-10-31
Every upward transition has positive probability. From any positive state the transition directly to zero has positive probability, since . Thus any state can reach zero and then reach any other state by successive upward steps, proving irreducibility.
If , the holding probability at zero is positive, so its period and hence the common period of the irreducible chain is one. At that holding probability vanishes, but zero has positive-probability return paths of length two and of length three. Their lengths have greatest common divisor one. Thus .
New to topics? Read the docs here!