A
AaronD
Member
Hi,
I was looking at question 4 from April 2011 and can't seem to get my head around the transition probabilities.
For example.
p1,1 = 0.7
Is this due to the fact that the only way we can go from state 1 (Poor) to state 1 is if we move downwards either once or twice, with probs .2 and .1 respectively, Which we take from 1 to give 0.7? If this is the case I don't understand why this would hold.
Another example:
p2,2 = .4
I think it might have something to do with 1 - prob of not moving. I.e. 1-(.2+.2+.1+.1)=.6 But I can be sure.
Any guidance here would be appreciated.
Thanks in advance
I was looking at question 4 from April 2011 and can't seem to get my head around the transition probabilities.
For example.
p1,1 = 0.7
Is this due to the fact that the only way we can go from state 1 (Poor) to state 1 is if we move downwards either once or twice, with probs .2 and .1 respectively, Which we take from 1 to give 0.7? If this is the case I don't understand why this would hold.
Another example:
p2,2 = .4
I think it might have something to do with 1 - prob of not moving. I.e. 1-(.2+.2+.1+.1)=.6 But I can be sure.
Any guidance here would be appreciated.
Thanks in advance