Hidden Markov Models, Markov Chains, Markov Switching, Markov Auto Regression, Maximum Likelihood.
Markov process needs to be in some state at each time step, it follows that: p11 + p12 = 1, and, p21 + p22 = 1 The state transition matrix P lets us express all transition probabilities in a compact matrix form as follows: The state transition matrix of the 2-state Markov process (Image by Author)