Incurred but not reported (IBNR) loss reserving is of great importance for Property & Casualty (P&C) insurers. However, the temporal dependence exhibited in the claim arrival process is not reflected in many current loss reserving models, which might affect the accuracy of the IBNR reserve predictions. To overcome this shortcoming, we proposed a marked Cox process and showed its many desirable properties in Badescu et al. (2016).

In this paper, we consider the model estimation and applications. We first present an expectation–maximization (EM) algorithm which guarantees the efficiency of the estimators unlike the moment estimation methods widely used in estimating Cox processes. In addition, the proposed fitting algorithm can be implemented at a reasonable computational cost. We examine the performance of the proposed algorithm through simulation studies. The applicability of the proposed model is tested by fitting it to a real insurance claim data set. Through out-of-sample tests, we find that the proposed model can provide realistic predictive distributions.

We observe that the technique of Markov contraction can be used to establish measure concentration for a broad class of noncontracting chains. In particular, geometric ergodicity provides a simple and versatile framework. This leads to a short, elementary proof of a general concentration inequality for Markov and hidden Markov chains, which supersedes some of the known results and easily extends to other processes such as Markov trees. As applications, we provide a Dvoretzky-Kiefer-Wolfowitz-type inequality and a uniform Chernoff bound. All of our bounds are dimension-free and hold for countably infinite state spaces.

The stochastic sequential assignment problem assigns distinct workers to sequentially arriving tasks with stochastic parameters. In this paper the assignments are performed so as to minimize the threshold probability, which is the probability of the long-run reward per task failing to achieve a target value (threshold). As the number of tasks approaches infinity, the problem is studied for independent and identically distributed (i.i.d.) tasks with a known distribution function and also for tasks that are derived from r distinct unobservable distributions (governed by a Markov chain). Stationary optimal policies are presented, which simultaneously minimize the threshold probability and achieve the optimal long-run expected reward per task.

We introduce a class of stochastic processes in discrete time with finite state space by means of a simple matrix product. We show that this class coincides with that of the hidden Markov chains and provides a compact framework for it. We study a measure obtained by a projection on the real line of the uniform measure on the Sierpinski gasket, finding that the dimension of this measure fits with the Shannon entropy of an associated hidden Markov chain.

The aim of this paper is to provide the conditions necessary to reduce the complexity of state filtering for finite stochastic systems (FSSs). A concept of lumpability for FSSs is introduced. In this paper we assert that the unnormalised filter for a lumped FSS has linear dynamics. Two sufficient conditions for such a lumpability property to hold are discussed. We show that the first condition is also necessary for the lumped FSS to have linear dynamics. Next, we prove that the second condition allows the filter of the original FSS to be obtained directly from the filter for the lumped FSS. Finally, we generalise an earlier published result for the approximation of a general FSS by a lumpable FSS.

In this note, we consider discrete-time finite Markov chains and assume that they are only partly observed. We obtain finite-dimensional normalized filters for basic statistics associated with such processes. Recursive equations for these filters are derived by means of simple computations involving conditional expectations. An application to the estimation of parameters of the so-called discrete-time batch Markovian arrival process is outlined.

An aggregated Markov chain is a Markov chain for which some states cannot be distinguished from each other by the observer. In this paper we consider the identifiability problem for such processes in continuous time, i.e. the problem of determining whether two parameters induce identical laws for the observable process or not. We also study the order of a continuous-time aggregated Markov chain, which is the minimum number of states needed to represent it. In particular, we give a lower bound on the order. As a by-product, we obtain results of this kind also for Markov-modulated Poisson processes, i.e. doubly stochastic Poisson processes whose intensities are directed by continuous-time Markov chains, and phase-type distributions, which are hitting times in finite-state Markov chains.