A source coding algorithm based on the classic Markov model is presented, which uses Vector Quantization and arithmetic coding in conjunction with a dynamically adapted context of previously coded vector indices. The core of this algorithm is the numerically optimized mapping from a large number of source states to a small number of different code tables. This enables its application to audio coding, where it provides higher efficiency than the quantization and lossless coding used in MPEG-AAC.
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