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The disorder problem for compound Poisson processes with exponential jumps

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  • Gapeev, Pavel V.

Abstract

The problem of disorder seeks to determine a stopping time which is as close as possible to the unknown time of “disorder” when the observed process changes its probability characteristics. We give a partial answer to this question for some special cases of Lévy processes and present a complete solution of the Bayesian and variational problem for a compound Poisson process with exponential jumps. The method of proof is based on reducing the Bayesian problem to an integro-differential free-boundary problem where, in some cases, the smooth-fit principle breaks down and is replaced by the principle of continuous fit.

Suggested Citation

  • Gapeev, Pavel V., 2005. "The disorder problem for compound Poisson processes with exponential jumps," LSE Research Online Documents on Economics 3219, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:3219
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    File URL: http://eprints.lse.ac.uk/3219/
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    References listed on IDEAS

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    1. Ernesto Mordecki, 1999. "Optimal stopping for a diffusion with jumps," Finance and Stochastics, Springer, vol. 3(2), pages 227-236.
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    Cited by:

    1. Asaf Cohen, 2015. "Parameter Estimation: The Proper Way to Use Bayesian Posterior Processes with Brownian Noise," Mathematics of Operations Research, INFORMS, vol. 40(2), pages 361-389, February.
    2. Asaf Cohen & Eilon Solan, 2013. "Bandit Problems with Lévy Processes," Mathematics of Operations Research, INFORMS, vol. 38(1), pages 92-107, February.
    3. Erhan Bayraktar & H. Poor, 2008. "Optimal time to change premiums," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 68(1), pages 125-158, August.
    4. Savas Dayanik & Semih O Sezer, 2023. "Model Misspecification in Discrete Time Bayesian Online Change Detection," Methodology and Computing in Applied Probability, Springer, vol. 25(1), pages 1-27, March.
    5. Pavel Gapeev, 2006. "Multiple Disorder Problems for Wiener and Compound Poisson Processes With Exponential Jumps," SFB 649 Discussion Papers SFB649DP2006-074, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    6. Krawiec, Michał & Palmowski, Zbigniew & Płociniczak, Łukasz, 2018. "Quickest drift change detection in Lévy-type force of mortality model," Applied Mathematics and Computation, Elsevier, vol. 338(C), pages 432-450.
    7. Bruno Buonaguidi, 2023. "Finite Horizon Sequential Detection with Exponential Penalty for the Delay," Journal of Optimization Theory and Applications, Springer, vol. 198(1), pages 224-238, July.
    8. Savas Dayanik & Semih Onur Sezer, 2006. "Compound Poisson Disorder Problem," Mathematics of Operations Research, INFORMS, vol. 31(4), pages 649-672, November.
    9. Gapeev, Pavel V. & Stoev, Yavor I., 2017. "On the Laplace transforms of the first exit times in one-dimensional non-affine jump–diffusion models," Statistics & Probability Letters, Elsevier, vol. 121(C), pages 152-162.
    10. Pavel V. Gapeev, 2006. "Integral Options in Models with Jumps," SFB 649 Discussion Papers SFB649DP2006-068, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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