Discrete-Time Markov Chains

This book focuses on two-time-scale Markov chains in discrete time. Our motivation stems from existing and emerging applications in optimization and control of complex systems in manufacturing, wireless communication, and ?nancial engineering. Much of our e?ort in this book is devoted to designing system models arising from various applications, analyzing them via analytic and probabilistic techniques, and developing feasible compu- tionalschemes. Ourmainconcernistoreducetheinherentsystemcompl- ity. Although each of the applications has its own distinct characteristics, all of them are closely related through the modeling of uncertainty due to jump or switching random processes. Oneofthesalientfeaturesofthisbookistheuseofmulti-timescalesin Markovprocessesandtheirapplications. Intuitively,notallpartsorcom- nents of a large-scale system evolve at the same rate. Some of them change rapidly and others vary slowly. The di?erent rates of variations allow us to reduce complexity via decomposition and aggregation. It would be ideal if we could divide a large system into its smallest irreducible subsystems completely separable from one another and treat each subsystem indep- dently. However, this is often infeasible in reality due to various physical constraints and other considerations. Thus, we have to deal with situations in which the systems are only nearly decomposable in the sense that there are weak links among the irreducible subsystems, which dictate the oc- sional regime changes of the system. An e?ective way to treat such near decomposability is time-scale separation. That is, we set up the systems as if there were two time scales, fast vs. slow. xii Preface Followingthetime-scaleseparation,weusesingularperturbationmeth- ology to treat the underlying systems.

Focusing on discrete-time-scale Markov chains, the contents of this book are an outgrowth of some of the authors' recent research.  The motivation stems from existing and emerging applications in optimization and control of complex hybrid Markovian systems in manufacturing, wireless communication, and financial engineering.  Much effort in this book is devoted to designing system models arising from these applications, analyzing them via analytic and probabilistic techniques, and developing feasible computational algorithms so as to reduce the inherent complexity.

This book presents results including asymptotic expansions of probability vectors, structural properties of occupation measures, exponential bounds, aggregation and decomposition and associated limit processes, and interface of discrete-time and continuous-time systems.  One of the salient features is that it contains a diverse range of applications on filtering, estimation, control, optimization, and Markov decision processes, and financial engineering.  This book will be an important reference for researchers in the areas of applied probability, control theory, operations research, as well as for practitioners who use optimization techniques.  Part of the book can also be used in a graduate course of applied probability, stochastic processes, and applications.