Multi-state Transition Models with Actuarial Applications

Actuaries regularly use probability models to analyze situations involving risk. These models often involve some entity and the various states in which it might be - alive or dead, intact or failed, et cetera. This chapter introduces a general type of model that can be applied in many such situations. Section 1 reviews some models of this type that you've probably already seen and then goes on to describe some practical applications for which those models are inadequate. Section 2 then introduces a more general probability model appropriate for these new cases.