Examples of Markov Chains

Abstract

In this chapter we present various examples of Markov chains. We will often use these examples in the sequel to illustrate the results we will develop. Most of our examples are derived from time series models or Monte Carlo simulation methods. Many time series models belong to the class of random iterative functions that are introduced in Section 2.1. We will establish in this section some properties of these models and in particular will provide conditions under which these models have an invariant probability. In Section 2.2, we introduce the so-called observation-driven models, which have many applications in econometrics in particular.