Approximating kth-order two-state Markov chains

Abstract

In this paper, we consider kth-order two-state Markov chains {Xi } with stationary transition probabilities. For k = 1, we construct in detail an upper bound for the total variation d(Sn, Y) = Σ x |𝐏(Sn = x) − 𝐏(Y = x)|, where S n = X 1 + · ··+ Xn and Y is a compound Poisson random variable. We also show that, under certain conditions, d(Sn, Y) converges to 0 as n tends to ∞. For k = 2, the corresponding results are given without derivation. For general k ≧ 3, a conjecture is proposed.