The disorder problem for compound Poisson processes with exponential jumps
Abstract
Description
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 Levy 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.
Published at http://dx.doi.org/10.1214/105051604000000981 in the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org)
Published at http://dx.doi.org/10.1214/105051604000000981 in the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org)