Closed form solutions for mapping general distributions to quasi-minimal PH distributions

Abstract

Approximating general distributions by phase-type (PH) distributions is a popular technique in stochastic analysis, since the Markovian property of PH distributions often allows analytical tractability. This paper proposes an algorithm for mapping a general distribution, G, to a PH distribution, which matches the first three moments of G. Efficiency of our algorithm hinges on narrowing the search space to a particular subset of the PH distributions, which we refer to as Erlang–Coxian (EC) distributions. The class of EC distributions has a small number of parameters, and we provide closed form solutions for these. Our solution applies to any distribution whose first three moments can be matched by a PH distribution. Also, our resulting EC distribution requires a nearly minimal number of phases, within one of the minimal number of phases required by any acyclic PH distribution.