hard · Quantitative Finance
In a 3-state absorbing Markov chain with states 1, 2, 3, state 3 is absorbing. The transition matrix is P = beginpmatrix 0.5 & 0.5 & 0 0.25 & 0.5 & 0.25 0 & 0 & 1 endpmatrix. Calculate the expected number of visits to state 2 before absorption, starting from state 1.
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