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Moreover, π 0 = P(j 1 = h 0 (S 0 ,K)) = 1. For y ≥ 1,
h y (S 0 ,K)
= u(y,h y−1 (S 0 ,K),S 0 [y],S 0 [y−1],K[y],K[h y−1 (S 0 ,K)])
= h y−1 (S 0 ,K) + S 0 [y] + K[y]
= h y−1 (S 0 ,K) + y + K[y].
Solving the recurrence, we get
y
h y (S 0 ,K) = y(y + 1)
2
+
K[x].
x=0
From the analysis in the proof of Lemma 3.1.7, we see that in the recurrence
of h y , S y [y] has been replaced by S 0 [y] and j y has been replaced by h y−1 (S 0 ,K).
Hence, we would have
π y
= P(S y [y] = S 0 [y])P(j y = h y−1 (S 0 ,K))
y π y−1 .
N −1
N
=
Solving this recurrence, we get
y(y+1)
2
y
x
N −1
N
N −1
N
π y =
=
.
x=0
Example 3.1.10. Consider the update rule
u(y,j y ,S y [y],S y [j y ],K[y],K[j y ]) = j y + S y [j y ] + K[j y ].
Here,
h 0 (S 0 ,K)
= u(0,0,S 0 [0],S 0 [0],K[0],K[0])
= 0 + 0 + K[0]
= K[0]
and π 0 = P(j 1 = h 0 (S 0 ,K)) = 1. For y ≥ 1,
h y (S 0 ,K)
= u(y,h y−1 (S 0 ,K),S 0 [y],S 0 [y−1],K[y],K[h y−1 (S 0 ,K)])
= h y−1 (S 0 ,K) + S 0 [y−1] + K[h y−1 (S 0 ,K)]
= h y−1 (S 0 ,K) + (y−1) + K[h y−1 (S 0 ,K)].
From the analysis in the proof of Lemma 3.1.7, we see that in the recurrence of
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