Introduction to stochastic processes with R (Q2803798)

This introductory textbook gives an overview of basic stochastic processes for undergraduate students who are interested in probability. The main concepts of random functions are given without referring to measure theoretic arguments which are necessary to rigorously construct the corresponding theory. This is done to facilitate the understanding of main ideas and to give the flavor of this complex theory at the elementary undergraduate level.NEWLINENEWLINEThe exposition starts with a review of basic probability concepts including conditional probability and expectation as well as Monte Carlo simulation. Discrete time Markov chains are considered in detail in the next four chapters. Their limiting behavior with increasing time, stationarity, ergodicity, time reversibility and absorption are main topics of interest. The corresponding limit theorems are proven. Branching processes are introduced as an example of Markov chains whose analysis needs special tools such as generating functions. A modern topic like Markov chain Monte Carlo is discussed in Chapter 5. There, the main ideas of the Metropolis-Hastings algorithm, Gibbs sampler, perfect sampling together with spectral estimates of the rate of convergence to a stationary distribution are given. Three equivalent definitions of a homogeneous Poisson point process are considered in the next chapter. The operations on point processes such as thinning and superposition, spatial and nonhomogeneous Poisson processes round up the chapter. Markov chains in continuous time are subject of Chapter 7. Their generators are discussed in connection with Kolmogorov forward and backward equations, as well as the existence of the stationary regime. Other topics are their long time behavior, time reversibility, absorption. Applications to queueing theory and the construction of Markov chains with Poisson subordinators as time parameter are given at the end of the chapter. The basic properties of the Wiener process are studied in Chapter 8. There, their approximation by random walks (invariance principle), the definition through specifying the covariance function of a Gaussian process, transformations, strong Markov property, distribution of zeros, connection to martingales and various applications (such as the distribution of the Kolmogorov-Smirnov statistic and Black-Scholes formula) are given. The last chapter treats the basics of stochastic calculus including the Itô integral, Itô's formula, stochastic differential equations and the Euler-Maruyama numerical method for their solution. There, the main ideas are given in a nutshell without difficult technical details. A crash course on the statistical software package \texttt{R} is provided in appendix together with a primer on probability and a summary of common probability distributions.NEWLINENEWLINEThe choice of material for the book is a matter of taste of the author. In this way, classical subjects such as Markov chains, Poisson process and Brownian motion take the major part of the book's content. Less canonical is the inclusion of branching processes and Markov chain Monte Carlo methods. On the contrary, stationary processes and processes with independent increments are not included at all, which is possibly dictated by the scope of an introductory lecture course.NEWLINENEWLINEOne of the clear merits of the book is the abundance of modern real life examples, exercises and \texttt{R} code that vividly illustrate the theory. Answers are given to some of the exercises at the end of the exposition. The book is accompanied with a web site where the \texttt{R} code to many examples can be downloaded.NEWLINENEWLINEThis text can be used by students as well as by professors of probability for an undergraduate course, and a number of seminars with focus on the elementary theory of stochastic processes.