Optimal detection of a hidden target: the median rule (Q424533): Difference between revisions
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Suppose we have an observation of a sample path of the continuous process \(X_t\) started at 0 and the problem is to detect when this sample path reaches a non-negative level \(\ell\) that is not directly observable -- \(X_t\) and \(\ell\) are assumed to be independent. The problem of detecting \(\ell\) with the help of the sequential observation of \(X_t\) has two distinct formulations. The space domain formulation, where the expected distance from \(X_{\tau}\) to \(\ell\) is minimized over all stopping times \({\tau}\) of \(X_t\), and the time domain formulation, where \(\tau_{\ell}\) denotes the first entry time of \(X_t\) at the level \(\ell\) and the expected distance from \({\tau}\) to \(\tau_{\ell}\) is minimized over all stopping times \({\tau}\) of \(X_t\). The optimal stopping time will depend on the chosen distance function, and it is not clear a priori how to select the most natural distance function in this respect. The main observation of the present paper is that there exists a single stopping time of \(X_t\) that is optimal in both the space domain and the time domain with respect to the expected Euclidean distance on the real line. More precisely, assuming that \({\operatorname E}\ell<\infty\) and \({\operatorname E}\tau_{\ell}<\infty\), and denoting by \(m\) the (lowest) median of \(\ell\), the author shows that the stopping time \(\tau_m=\inf\{t\geq0|X_t=m\}\) minimises simultaneously both \({\operatorname E}|X_{\tau}-{\ell}|\) and \({\operatorname E}|\tau-\tau_{\ell}|\) over all stopping times \({\tau}\) of \(X_t\). The author shows that two-sided versions of the same problem and variational refinements of both problems lead to new classes of median/quantile rules having a dynamic character. The latter analysis is based on the method of Lagrange multipliers in optimal stopping. | |||
Property / review text: Suppose we have an observation of a sample path of the continuous process \(X_t\) started at 0 and the problem is to detect when this sample path reaches a non-negative level \(\ell\) that is not directly observable -- \(X_t\) and \(\ell\) are assumed to be independent. The problem of detecting \(\ell\) with the help of the sequential observation of \(X_t\) has two distinct formulations. The space domain formulation, where the expected distance from \(X_{\tau}\) to \(\ell\) is minimized over all stopping times \({\tau}\) of \(X_t\), and the time domain formulation, where \(\tau_{\ell}\) denotes the first entry time of \(X_t\) at the level \(\ell\) and the expected distance from \({\tau}\) to \(\tau_{\ell}\) is minimized over all stopping times \({\tau}\) of \(X_t\). The optimal stopping time will depend on the chosen distance function, and it is not clear a priori how to select the most natural distance function in this respect. The main observation of the present paper is that there exists a single stopping time of \(X_t\) that is optimal in both the space domain and the time domain with respect to the expected Euclidean distance on the real line. More precisely, assuming that \({\operatorname E}\ell<\infty\) and \({\operatorname E}\tau_{\ell}<\infty\), and denoting by \(m\) the (lowest) median of \(\ell\), the author shows that the stopping time \(\tau_m=\inf\{t\geq0|X_t=m\}\) minimises simultaneously both \({\operatorname E}|X_{\tau}-{\ell}|\) and \({\operatorname E}|\tau-\tau_{\ell}|\) over all stopping times \({\tau}\) of \(X_t\). The author shows that two-sided versions of the same problem and variational refinements of both problems lead to new classes of median/quantile rules having a dynamic character. The latter analysis is based on the method of Lagrange multipliers in optimal stopping. / rank | |||
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Property / reviewed by | |||
Property / reviewed by: Mikhail P. Moklyachuk / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 60G35 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 62M20 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 49J40 / rank | |||
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Property / zbMATH DE Number | |||
Property / zbMATH DE Number: 6040320 / rank | |||
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Property / zbMATH Keywords | |||
optimal stopping | |||
Property / zbMATH Keywords: optimal stopping / rank | |||
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Property / zbMATH Keywords | |||
hidden target | |||
Property / zbMATH Keywords: hidden target / rank | |||
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rolling median/quantile rule | |||
Property / zbMATH Keywords: rolling median/quantile rule / rank | |||
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Lagrange multiplier | |||
Property / zbMATH Keywords: Lagrange multiplier / rank | |||
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Revision as of 22:27, 29 June 2023
scientific article
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English | Optimal detection of a hidden target: the median rule |
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Optimal detection of a hidden target: the median rule (English)
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1 June 2012
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Suppose we have an observation of a sample path of the continuous process \(X_t\) started at 0 and the problem is to detect when this sample path reaches a non-negative level \(\ell\) that is not directly observable -- \(X_t\) and \(\ell\) are assumed to be independent. The problem of detecting \(\ell\) with the help of the sequential observation of \(X_t\) has two distinct formulations. The space domain formulation, where the expected distance from \(X_{\tau}\) to \(\ell\) is minimized over all stopping times \({\tau}\) of \(X_t\), and the time domain formulation, where \(\tau_{\ell}\) denotes the first entry time of \(X_t\) at the level \(\ell\) and the expected distance from \({\tau}\) to \(\tau_{\ell}\) is minimized over all stopping times \({\tau}\) of \(X_t\). The optimal stopping time will depend on the chosen distance function, and it is not clear a priori how to select the most natural distance function in this respect. The main observation of the present paper is that there exists a single stopping time of \(X_t\) that is optimal in both the space domain and the time domain with respect to the expected Euclidean distance on the real line. More precisely, assuming that \({\operatorname E}\ell<\infty\) and \({\operatorname E}\tau_{\ell}<\infty\), and denoting by \(m\) the (lowest) median of \(\ell\), the author shows that the stopping time \(\tau_m=\inf\{t\geq0|X_t=m\}\) minimises simultaneously both \({\operatorname E}|X_{\tau}-{\ell}|\) and \({\operatorname E}|\tau-\tau_{\ell}|\) over all stopping times \({\tau}\) of \(X_t\). The author shows that two-sided versions of the same problem and variational refinements of both problems lead to new classes of median/quantile rules having a dynamic character. The latter analysis is based on the method of Lagrange multipliers in optimal stopping.
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optimal stopping
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hidden target
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rolling median/quantile rule
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Lagrange multiplier
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