Change-point detection for L\'evy processes

TL;DR

This paper proves that the CUSUM procedure is optimal for detecting change points in Lévy processes, extending classical results to processes with jumps and continuous-time settings.

Contribution

It establishes the optimality of CUSUM for change-point detection in Lévy processes, filling a gap in the theory for jump processes in continuous time.

Findings

CUSUM is optimal for Lévy processes in Lorden's sense.

The approach uses approximation via equispaced sampling.

Extends classical change-point detection results to jump processes.

Abstract

Since the work of Page in the 1950s, the problem of detecting an abrupt change in the distribution of stochastic processes has received a great deal of attention. In particular, a deep connection has been established between Lorden's minimax approach to change-point detection and the widely used CUSUM procedure, first for discrete-time processes, and subsequently for some of their continuous-time counterparts. However, results for processes with jumps are still scarce, while the practical importance of such processes has escalated since the turn of the century. In this work we consider the problem of detecting a change in the distribution of continuous-time processes with independent and stationary increments, i.e. L\'evy processes, and our main result shows that CUSUM is indeed optimal in Lorden's sense. This is the most natural continuous-time analogue of the seminal work of Moustakides for sequentially observed random variables that are assumed to be i.i.d. before and after the change-point. From a practical perspective, the approach we adopt is appealing as it consists in approximating the continuous-time problem by a suitable sequence of change-point problems with equispaced sampling points, and for which a CUSUM procedure is shown to be optimal.