Related papers: Multi-state models for evaluating conversion optio…
We consider a collection of statistically identical two-state continuous time Markov chains (channels). A controller continuously selects a channel with the view of maximizing infinite horizon average reward. A switching cost is paid upon…
Regime detection is vital for the effective operation of trading and investment strategies. However, the most popular means of doing this, the two-state Markov-switching regression model (MSR), is not an optimal solution, as two volatility…
In this paper we show existence and uniqueness of a solution for a system of m variational partial differential inequalities with inter-connected obstacles. This system is the deterministic version of the Verification Theorem of the…
We propose a very efficient method for pricing various types of lookback options under Markov models. We utilize the model-free representations of lookback option prices as integrals of first passage probabilities. We combine efficient…
Inspired by a duration-dependent life insurance model, we consider continuous-time semi-Markov jump processes, initially assumed to have a finite state-space. We develop approximations using jump processes that are time-homogeneous Markov,…
In reinforcement learning, the reward function on current state and action is widely used. When the objective is about the expectation of the (discounted) total reward only, it works perfectly. However, if the objective involves the total…
We propose a Markov chain model for credit rating changes. We do not use any distributional assumptions on the asset values of the rated companies but directly model the rating transitions process. The parameters of the model are estimated…
This paper provides a methodology for fast and accurate pricing of the long-dated contracts that arise as the building blocks of insurance and pension fund agreements. It applies the recursive marginal quantization (RMQ) and joint recursive…
In recent years, a wide range of mortality models has been proposed to address the diverse factors influencing mortality rates, which has highlighted the need to perform model selection. Traditional mortality model selection methods, such…
We introduce a collective model for life insurance where the heterogeneity of each insured, including the health state, is modeled by a diffusion process. This model is influenced by concepts in statistical mechanics. Using the proposed…
The expansion of global production networks has raised many important questions about the interdependence among countries and how future changes in the world economy are likely to affect the countries' positioning in global value chains. We…
This paper reviews discounting approaches for modeling multi-year energy investments, focusing on total versus annualised cost formulations. We discuss how time value of money is handled, and how salvage value and milestone-year weighting…
We consider multi-state capture-recapture-recovery data where observed individuals are recorded in a set of possible discrete states. Traditionally, the Arnason-Schwarz model has been fitted to such data where the state process is modeled…
Markov automata combine non-determinism, probabilistic branching, and exponentially distributed delays. This compositional variant of continuous-time Markov decision processes is used in reliability engineering, performance evaluation and…
This paper addresses the problem of checking invariant properties for a large class of symbolic transition systems, defined by a combination of SMT theories and quantifiers. State variables can be functions from an uninterpreted sort…
In this paper a real option approach for the valuation of real assets is presented. Two continuous time models used for valuation are described: geometric Brownian motion model and interest rate model. The valuation for electricity spread…
This paper deals with control of partially observable discrete-time stochastic systems. It introduces and studies Markov Decision Processes with Incomplete Information and with semi-uniform Feller transition probabilities. The important…
Survival competing risks models are very useful for studying the incidence of diseases whose occurrence competes with other possible diseases or health conditions. These models perform properly when working with terminal events, such as…
We develop and apply an approach for analyzing multi-curve data where each curve is driven by a latent state process. The state at any particular point determines a smooth function, forcing the individual curve to switch from one function…
The aim of this contribution is to derive a general matrix formula for the net period premium paid in more than one state. For this purpose we propose to combine actuarial technics with the graph optimization methodology. The obtained…