Course detail

# Stochastic Processes

FEKT-MPC-NPRAcad. year: 2020/2021

The course includes an introduction to the theory of stochastic processes types. Therefore, it starts with repetition of necessary mathematical tools (matrices, determinants, solving equations, decomposition into partial fractions, probability). Then we construct the theory of stochastic processes, where we discuss Markovský processes and chains, both discrete and continuous. We include a basic classification of state and students learn to determine them. Great attention is paid to their asymptotic properties. The next section introduces the award transitions between states and students learn the decision-making processes and their possible solutions. In conclusion, we mention the hidden Markov processes and possible solutions.

Supervisor

Department

Learning outcomes of the course unit

The student is able to:

• Describe the basic properties of random processes.

• Explain the basic Markov property.

• Build an matrix of a Markov chain.

• Explain the procedure to calculate the square matrix.

• Perform the classification of states of Markov chains in discrete and continuous case.

• Analyze a Markov chain using the Z-transform in the discrete case and the Laplace transformation in the continuous case.

• Explain the procedure for solving decision problems.

• Describe the procedure for solving the decision-making role with alternatives.

• Discuss the differences between the Markov chain and hidden Markov chain.

Prerequisites

We require knowledge at the level of bachelor's degree, i.e. students must have proficiency in working with sets (intersection, union, complement), be able to work with matrices, handle the calculation of solving systems of linear algebraic equations using the elimination method and calculation of the matrix inverse, know the series and their sums, know the graphs of elementary functions and methods of construction, differentiate and integrate of basic functions.

Co-requisites

Not applicable.

Recommended optional programme components

Not applicable.

Recommended or required reading

BAŠTINEC, J.; SVOBODA, Z. Náhodné procesy. Brno: 2011. s. 1-182. (CS)

PINSKY, Mark A., KARLIN, Samuel: An Introduction to Stochastic Modeling, fourth edition. Elsevir 2011, ISBN 978-0-12-381416-6 (EN)

GUSAK, D., KUKUSH, A., KULIK, A., MISHURA, Y., PILIPENKO, A.: Theory of Stochastic Processes. Springer 2010, ISBN 978-0-387-87861-4 (EN)

CAPINSKI, M., ZASTAWNIAK, T.: Probability Through Problems. Springer 2001. ISBN 0-387-95063-X (EN)

BAUERLE, N., RIEDER, U.: Markov Decision Processes with Applications to Finance. Springer 2011. ISBN 978-3-642-18323-2 (EN)

IBE, O. C.: Markov processes for Stochastic Modeling.Elsevir 2009. ISBN 978-0-12-3744451-7 (EN)

Planned learning activities and teaching methods

Techning methods include lectures and computer laboratories.

Assesment methods and criteria linked to learning outcomes

Requirements for successful completion of the course are provided in annual public notice. Students can obtain:

Up to 30 points for computer exercises that can be obtained a written test (20 points) and 10 points for activity assessment exercises.

Up to 70 points for the written final exam. The test contains both theoretical and numerical tasks that are used to verify the orientation in the problems of stochastic processes and their applications.

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Language of instruction

Czech

Work placements

Not applicable.

Course curriculum

1. The construction of the necessary mathematical tools.

2. Probability.

3. Random processes, basic concepts, characteristics of random processes.

4. Discrete Markov chain. Homogeneous Markov chains, classification of states.

5. Regular Markov chains, limit vector, the fundamental matrix, and the median of the first transition.

6. Absorption chain mean transit time, transit and residence.

7. Analysis of Markov chains using Z-transform.

8. Calculation of powers of the transition matrix.

9. Continuous time Markov chains. Classification using the Laplace transform.

10. Poisson process. Linear growth process, linear process of extinction, linear process of growth and decline.

11. Markov decision processes. The award transitions. Asymptotic properties.

12. Decision-making processes with alternatives.

13. Hidden Markov processes.

Aims

The aim of the course is to provide students with a comprehensive overview of the basic concepts and results relating to the theory of stochastic processes and especially Markov chains and processes. We show possibilities of application of the decision-making processes of various types.

Specification of controlled education, way of implementation and compensation for absences

Computer exercises are compulsory. Properly excused absence can be replaced by individual homework, which focuses on the issues discussed during the missed exercise.

Specifications of the controlled activities and ways of implementation are provided in annual public notice.

Date of the written test is announced in agreement with the students at least one week in advance. The new term for properly excused students is usually during the credit week.

Classification of course in study plans

- Programme MPC-BTB Master's, 1. year of study, winter semester, 5 credits, compulsory-optional