A Bayesian-Martingale Approach to the General Disorder Problem

We consider a Bayesian-martingale approach to the general change-point detection problem. In our setting the change-point represents a random time of bifurcation of two probability measures given on the space of right-continuous functions. We derive a reflecting backward stochastic differential equation (RBSDE) for the value process related to the disorder problem and show that in classical cases of the Wiener and Poisson disorder problems this RBSDE is equivalent to free-boundary problems for parabolic differential and differential-difference operators respectively. © 2006 Elsevier Ltd. All rights reserved.