Paper 3, Section I, H

Markov Chains
Part IB, 2009

Let (Xn)n0\left(X_{n}\right)_{n \geqslant 0} be a simple random walk on the integers: the random variables ξnXnXn1\xi_{n} \equiv X_{n}-X_{n-1} are independent, with distribution

P(ξ=1)=p,P(ξ=1)=qP(\xi=1)=p, \quad P(\xi=-1)=q

where 0<p<10<p<1, and q=1pq=1-p. Consider the hitting time τ=inf{n:Xn=0\tau=\inf \left\{n: X_{n}=0\right. or Xn=N}\left.X_{n}=N\right\}, where N>1N>1 is a given integer. For fixed s(0,1)s \in(0,1) define ξk=E[sτ:Xτ=0X0=k]\xi_{k}=E\left[s^{\tau}: X_{\tau}=0 \mid X_{0}=k\right] for k=0,,Nk=0, \ldots, N. Show that the ξk\xi_{k} satisfy a second-order difference equation, and hence find them.