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Rate distortion optimization (RDO) algorithm plays the vital role in the up to date hybrid video codec H.264/AVC. The RDO algorithm of H.264/AVC reference software is built up by assuming that the transformed residues are memoryless variables. However, our experiments reveal that, for some sequences, the strong temporal correlations exist in the prediction residues. This paper extends the Lagrangian optimization techniques by modeling the transformed residues as the first-order Markov sourcedoi:10.1109/icassp.2012.6288099 dblp:conf/icassp/LiuWZI12 fatcat:zrverc2zs5gbrii76pqdzoi6ya