For the Following Transition Matrices, Determine the Transient or Absorbing $$\left| \begin{array} { l l l l } 0 & 0 & 2 / 3 & 1 / 3 \\0 & 1 & 0 & 0 \\3 / 4 & 1 / 4 & 0 & 0 \\1 & 0 & 0 & 0\end{array} \right|$$

question 57

Short Answer

For the following transition matrices, determine the transient or absorbing states. $$\left| \begin{array} { l l l l } 0 & 0 & 2 / 3 & 1 / 3 \\0 & 1 & 0 & 0 \\3 / 4 & 1 / 4 & 0 & 0 \\1 & 0 & 0 & 0\end{array} \right|$$

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Definitions:

Arbitrage Opportunities

Situations in which it is possible to simultaneously buy and sell an asset or assets to profit from a difference in prices across different markets or formats without risk.

Expected Excess Return

The return on an investment over the risk-free rate of return that is anticipated based on risk assessment.

Beta Coefficient

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates more volatility than the market.

One-Factor APT

A model that describes financial markets and attempts to predict the returns of securities with a single factor, usually related to economic risk.