Markov properties, Managerial Accounting

Markov Properties

1) Transition probabilities are dependent only on the current state of the system i.e. provided that the current state is recognized; the conditional probability of the next state is independent of the states, prior to the current state. (This is known as property of no memory).

2) The transition probabilities are constant over time.

3) The transition probabilities of moving to alternative states in the next time period, given a state in the current time period, must sum to one.

These properties are quite restrictive and hence the application of Markov Analysis is limited to few real-world problems.

Given that a set of possible states in Markov Chain is finite, a square matrix, P, made up of all Pij's of Markov Chain can be formed.

The following table represents the commonly used transition probability matrix.

2267_box.jpg

Where n is the number of exhaustive and mutually exclusive states.

Pij is the transition probability of going from the present i th state to the next j th state.

Thus the rows represent the possible present states (i's) and columns, represent the possible future states (j's).

By definition     P11 +    P12 +    P13 +........ P1n = 1
Similarly,         P21 +    P22 +    P23 +........  P2n = 1 etc.

 

Posted Date: 12/8/2012 4:29:08 AM | Location : United States







Related Discussions:- Markov properties, Assignment Help, Ask Question on Markov properties, Get Answer, Expert's Help, Markov properties Discussions

Write discussion on Markov properties
Your posts are moderated
Related Questions
The other source of spontaneous short-term financing is the accrued expenses which arise by the general conduct of business. An accrued expense is an expense which has been incurre

How to calculate straight line depreciation for a partial year i.e. Refurb. depreciation starts in may till end of 8 year lease. Therefore its 7.666 years

Prepare an estimation of working capital needs from the subsequent information of a trading relates with: (a) Projected Annual Sales 1,00,000

Bridge loans are obtainable from the banks and financial institutions while the source and timing of the funds to be raised is identified along with certainty. While there is a tim

Define Activities based costing by horngren According to horngren " ABC is a system that focuses on activities as fundamental cost object and utilizes cost of these activi


Decision Making Process Decision making is the process of choosing among alternatives. There are 7 steps that should be followed as shown in figure below:   Figure:

The Pinewood Furniture Company Pty Ltd plans to design two lines of chairs in the coming year-lounge and patio. The company is considering introducing an activity-based costing sys

Working Capital management is affected through two characteristics of current assets that are as follows (i) short life span (ii) swift transformation in the other asset forms.

Learning and Spillovers The cost of a value activity can decline over time due to learning that increases its efficiency. The methods by which learning can lower cost over tim