Article: article from journal or magazin.
Exact boundaries in sequential testing for phase-type distributions
Journal of Applied Probability
Consider Wald's sequential probability ratio test for deciding whether a sequence of independent and identically distributed observations comes from a specified phase-type distribution or from an exponentially tilted alternative distribution. Exact decision boundaries for given type-I and type-II errors are derived by establishing a link with ruin theory. Information on the mean sample size of the test can be retrieved as well. The approach relies on the use of matrix-valued scale functions associated with a certain one-sided Markov additive process. By suitable transformations, the results also apply to other types of distributions, including some distributions with regularly varying tails.
Esscher transform, Markov additive process, Scale function, Sequential probability ratio test, Two-sided exit problem
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