Recall that this is dened by p b a p b a p a if

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Unformatted text preview: u need help with this notion, see section A.1 of the appendix. Turning now to the formal definition, we say that Xn is a discrete time Markov chain with transition matrix p(i, j ) if for any j, i, in 1 , . . . i0 P (Xn+1 = j |Xn = i, Xn 1 = in 1 , . . . , X0 = i0 ) = p(i, j ) (1.1) Here and in what follows, boldface indicates a word or phrase that is being defined or explained. Equation (1.1) explains what we mean when we say that “given the current state Xn , any other information about the past is irrelevant for predicting 1 2 CHAPTER 1. MARKOV CHAINS Xn+1 .” In formulating (1.1) we have restricted our attention to the temporally homogeneous case in which the transition probability p(i, j ) = P (Xn+1 = j |Xn = i) does not depend on the time n. Intuitively, the transition probability gives the rules of the game. It is the basic information needed to describe a Markov chain. In the case of the gambler’s ruin chain, the transition probability has p(i, i + 1) = 0.4, p(i, i 1) = 0.6, p(0, 0) = 1 p(N, N ) = 1 if 0 < i &l...
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This document was uploaded on 03/06/2014 for the course MATH 4740 at Cornell.

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