Delay-Penalty Comparison for Sequential Testing and Quickest Detection in State-Dependent Diffusion Models (opens in new tab)

We study sequential testing and Bayesian quickest detection for diffusion observations whose drift changes between two alternatives while the signal-to-noise ratio may depend on the current observation. In this setting the posterior probability is generally not a closed one-dimensional Markov statistic: the natural sufficient state is the augmented process consisting of the posterior (or likelihood ratio) and the observed diffusion. We formula...