Past exam of the Probability, statistics and options II course of the University of Oxford / 2007 / M / 5 / a / Solution

A Poisson process of rate $\lambda$ is a counting process starting at zero, with independent stationary increments, such that an increment over an interval of length $t$ has the Poisson distribution of parameter $\lambda t$. It has right-continuous paths with unit jumps almost surely.

Independence of the two processes makes increments of $A+B$ independent on disjoint intervals. The sum of independent Poisson random variables with parameters $\alpha t$ and $\beta t$ is Poisson with parameter $(\alpha +\beta )t$, as follows by convolution:Thus $A+B$ is a Poisson process of rate $\alpha +\beta$. Its first red and green waiting times are independent exponential random variables of rates $\alpha ,\beta$, so