A decoupling principle for Markov-modulated chains

2021 ◽  
pp. 109301
Author(s):  
Qinjing Qiu ◽  
Reiichiro Kawai
Keyword(s):  
2021 ◽  
Vol 208 ◽  
pp. 107318
Author(s):  
Yoel G. Yera ◽  
Rosa E. Lillo ◽  
Bo F. Nielsen ◽  
Pepa Ramírez-Cobo ◽  
Fabrizio Ruggeri

2021 ◽  
Vol 58 (2) ◽  
pp. 372-393
Author(s):  
H. M. Jansen

AbstractOur aim is to find sufficient conditions for weak convergence of stochastic integrals with respect to the state occupation measure of a Markov chain. First, we study properties of the state indicator function and the state occupation measure of a Markov chain. In particular, we establish weak convergence of the state occupation measure under a scaling of the generator matrix. Then, relying on the connection between the state occupation measure and the Dynkin martingale, we provide sufficient conditions for weak convergence of stochastic integrals with respect to the state occupation measure. We apply our results to derive diffusion limits for the Markov-modulated Erlang loss model and the regime-switching Cox–Ingersoll–Ross process.


2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Ishak Alia ◽  
Farid Chighoub

Abstract This paper studies optimal time-consistent strategies for the mean-variance portfolio selection problem. Especially, we assume that the price processes of risky stocks are described by regime-switching SDEs. We consider a Markov-modulated state-dependent risk aversion and we formulate the problem in the game theoretic framework. Then, by solving a flow of forward-backward stochastic differential equations, an explicit representation as well as uniqueness results of an equilibrium solution are obtained.


2021 ◽  
Vol 14 (5) ◽  
pp. 188
Author(s):  
Leunglung Chan ◽  
Song-Ping Zhu

This paper investigates the American option price in a two-state regime-switching model. The dynamics of underlying are driven by a Markov-modulated Geometric Wiener process. That means the interest rate, the appreciation rate, and the volatility of underlying rely on hidden states of the economy which can be interpreted in terms of Markov chains. By means of the homotopy analysis method, an explicit formula for pricing two-state regime-switching American options is presented.


1996 ◽  
Vol 33 (01) ◽  
pp. 57-70
Author(s):  
Bartłomiej Błaszczyszyn ◽  
Tomasz Rolski

Let N be a stationary Markov-modulated marked point process on ℝ with intensity β ∗ and consider a real-valued functional ψ(N). In this paper we study expansions of the form Eψ(N) = a 0 + β ∗ a 1 + ·· ·+ (β∗ ) nan + o((β ∗) n ) for β ∗→ 0. Formulas for the coefficients ai are derived in terms of factorial moment measures of N. We compute a 1 and a 2 for the probability of ruin φ u with initial capital u for the risk process in the Markov-modulated environment; a 0 = 0. Moreover, we give a sufficient condition for ϕu to be an analytic function of β ∗. We allow the premium rate function p(x) to depend on the actual risk reserve.


2020 ◽  
Vol 70 (1) ◽  
pp. 181-189
Author(s):  
Guy Baele ◽  
Mandev S Gill ◽  
Paul Bastide ◽  
Philippe Lemey ◽  
Marc A Suchard

Abstract Markov models of character substitution on phylogenies form the foundation of phylogenetic inference frameworks. Early models made the simplifying assumption that the substitution process is homogeneous over time and across sites in the molecular sequence alignment. While standard practice adopts extensions that accommodate heterogeneity of substitution rates across sites, heterogeneity in the process over time in a site-specific manner remains frequently overlooked. This is problematic, as evolutionary processes that act at the molecular level are highly variable, subjecting different sites to different selective constraints over time, impacting their substitution behavior. We propose incorporating time variability through Markov-modulated models (MMMs), which extend covarion-like models and allow the substitution process (including relative character exchange rates as well as the overall substitution rate) at individual sites to vary across lineages. We implement a general MMM framework in BEAST, a popular Bayesian phylogenetic inference software package, allowing researchers to compose a wide range of MMMs through flexible XML specification. Using examples from bacterial, viral, and plastid genome evolution, we show that MMMs impact phylogenetic tree estimation and can substantially improve model fit compared to standard substitution models. Through simulations, we show that marginal likelihood estimation accurately identifies the generative model and does not systematically prefer the more parameter-rich MMMs. To mitigate the increased computational demands associated with MMMs, our implementation exploits recent developments in BEAGLE, a high-performance computational library for phylogenetic inference. [Bayesian inference; BEAGLE; BEAST; covarion, heterotachy; Markov-modulated models; phylogenetics.]


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