diff --git a/src/storm-pomdp/transformer/ObservationTraceUnfolder.cpp b/src/storm-pomdp/transformer/ObservationTraceUnfolder.cpp
new file mode 100644
index 000000000..a300e1880
--- /dev/null
+++ b/src/storm-pomdp/transformer/ObservationTraceUnfolder.cpp
@@ -0,0 +1,158 @@
+#include "storm/exceptions/InvalidArgumentException.h"
+#include "storm-pomdp/transformer/ObservationTraceUnfolder.h"
+
+
+namespace storm {
+    namespace pomdp {
+        template<typename ValueType>
+        ObservationTraceUnfolder<ValueType>::ObservationTraceUnfolder(storm::models::sparse::Pomdp<ValueType> const& model) : model(model) {
+            statesPerObservation = std::vector<storm::storage::BitVector>(model.getNrObservations(), storm::storage::BitVector(model.getNumberOfStates()));
+            for (uint64_t state = 0; state < model.getNumberOfStates(); ++state) {
+                statesPerObservation[model.getObservation(state)].set(state, true);
+            }
+        }
+
+        template<typename ValueType>
+        std::shared_ptr<storm::models::sparse::Mdp<ValueType>> ObservationTraceUnfolder<ValueType>::transform(
+                const std::vector<uint32_t> &observations, std::vector<ValueType> const& risk) {
+            std::vector<uint32_t> modifiedObservations = observations;
+            // First observation should be special.
+            // This just makes the algorithm simpler because we do not treat the first step as a special case later.
+            modifiedObservations[0] = model.getNrObservations();
+
+            storm::storage::BitVector initialStates = model.getInitialStates();
+            storm::storage::BitVector actualInitialStates = initialStates;
+            for (uint64_t state : initialStates) {
+                if (model.getObservation(state) != observations[0]) {
+                    actualInitialStates.set(state, false);
+                }
+            }
+            STORM_LOG_THROW(actualInitialStates.getNumberOfSetBits() == 1, storm::exceptions::InvalidArgumentException, "Must have unique initial state matching the observation");
+            //
+            statesPerObservation.resize(model.getNrObservations() + 1);
+            statesPerObservation[model.getNrObservations()] = actualInitialStates;
+
+
+            std::map<uint64_t,uint64_t> unfoldedToOld;
+            std::map<uint64_t,uint64_t> unfoldedToOldNextStep;
+            std::map<uint64_t,uint64_t> oldToUnfolded;
+
+            // Add this initial state state:
+            unfoldedToOldNextStep[0] = actualInitialStates.getNextSetIndex(0);
+
+            storm::storage::SparseMatrixBuilder<ValueType> transitionMatrixBuilder(0,0,0,true,true);
+            uint64_t newStateIndex = 1;
+            uint64_t newRowGroupStart = 0;
+            uint64_t newRowCount = 0;
+            // Notice that we are going to use a special last step
+
+            for (uint64_t step = 0; step < observations.size() - 1; ++step) {
+                std::cout << "step " << step  << std::endl;
+                oldToUnfolded.clear();
+                unfoldedToOld = unfoldedToOldNextStep;
+                unfoldedToOldNextStep.clear();
+
+                for (auto const& unfoldedToOldEntry : unfoldedToOld) {
+                    transitionMatrixBuilder.newRowGroup(newRowGroupStart);
+                    std::cout << "\tconsider new state " << unfoldedToOldEntry.first << std::endl;
+                    assert(step == 0 || newRowCount == transitionMatrixBuilder.getLastRow() + 1);
+                    uint64_t oldRowIndexStart = model.getNondeterministicChoiceIndices()[unfoldedToOldEntry.second];
+                    uint64_t oldRowIndexEnd = model.getNondeterministicChoiceIndices()[unfoldedToOldEntry.second+1];
+
+                    for (uint64_t oldRowIndex = oldRowIndexStart; oldRowIndex != oldRowIndexEnd; oldRowIndex++) {
+                        std::cout << "\t\tconsider old action " << oldRowIndex << std::endl;
+                        std::cout << "\t\tconsider new row nr " << newRowCount << std::endl;
+
+                        ValueType resetProb = storm::utility::zero<ValueType>();
+                        // We first find the reset probability
+                        for (auto const &oldRowEntry : model.getTransitionMatrix().getRow(oldRowIndex)) {
+                            if (model.getObservation(oldRowEntry.getColumn()) != observations[step + 1]) {
+                                resetProb += oldRowEntry.getValue();
+                            }
+                        }
+                        std::cout << "\t\t\t add reset" << std::endl;
+
+                        // Add the resets
+                        if (resetProb != storm::utility::zero<ValueType>()) {
+                            transitionMatrixBuilder.addNextValue(newRowCount, 0, resetProb);
+                        }
+
+                        std::cout << "\t\t\t add other transitions..." << std::endl;
+
+                        // Now, we build the outgoing transitions.
+                        for (auto const &oldRowEntry : model.getTransitionMatrix().getRow(oldRowIndex)) {
+                            if (model.getObservation(oldRowEntry.getColumn()) != observations[step + 1]) {
+                                continue;// already handled.
+                            }
+                            uint64_t column = 0;
+
+                            auto entryIt = oldToUnfolded.find(oldRowEntry.getColumn());
+                            if (entryIt == oldToUnfolded.end()) {
+                                column = newStateIndex;
+                                oldToUnfolded[oldRowEntry.getColumn()] = column;
+                                unfoldedToOldNextStep[column] = oldRowEntry.getColumn();
+                                newStateIndex++;
+                            } else {
+                                column = entryIt->second;
+                            }
+                            std::cout << "\t\t\t\t transition to " << column << std::endl;
+                            transitionMatrixBuilder.addNextValue(newRowCount, column,
+                                                                   oldRowEntry.getValue());
+                        }
+                        newRowCount++;
+                    }
+
+                    newRowGroupStart = transitionMatrixBuilder.getLastRow() + 1;
+
+                }
+            }
+            std::cout << "Adding last step..." << std::endl;
+            // Now, take care of the last step.
+            uint64_t sinkState = newStateIndex;
+            uint64_t targetState = newStateIndex + 1;
+            for (auto const& unfoldedToOldEntry : unfoldedToOldNextStep) {
+                transitionMatrixBuilder.newRowGroup(newRowGroupStart);
+                if (!storm::utility::isZero(storm::utility::one<ValueType>() - risk[unfoldedToOldEntry.second])) {
+                    transitionMatrixBuilder.addNextValue(newRowGroupStart, sinkState,
+                                                         storm::utility::one<ValueType>() - risk[unfoldedToOldEntry.second]);
+                }
+                if (!storm::utility::isZero(risk[unfoldedToOldEntry.second])) {
+                    transitionMatrixBuilder.addNextValue(newRowGroupStart, targetState,
+                                                           risk[unfoldedToOldEntry.second]);
+                }
+                newRowGroupStart++;
+            }
+            // sink state
+            transitionMatrixBuilder.newRowGroup(newRowGroupStart);
+            transitionMatrixBuilder.addNextValue(newRowGroupStart, sinkState, storm::utility::one<ValueType>());
+            newRowGroupStart++;
+            transitionMatrixBuilder.newRowGroup(newRowGroupStart);
+            // target state
+            transitionMatrixBuilder.addNextValue(newRowGroupStart, targetState, storm::utility::one<ValueType>());
+
+
+
+            storm::storage::sparse::ModelComponents<ValueType> components;
+            components.transitionMatrix = transitionMatrixBuilder.build();
+            std::cout << components.transitionMatrix << std::endl;
+
+            STORM_LOG_ASSERT(components.transitionMatrix.getRowGroupCount() == targetState + 1, "Expect row group count (" << components.transitionMatrix.getRowGroupCount() << ") one more as target state index " << targetState << ")");
+
+            storm::models::sparse::StateLabeling labeling(components.transitionMatrix.getRowGroupCount());
+            labeling.addLabel("_goal");
+            labeling.addLabelToState("_goal", targetState);
+            labeling.addLabel("init");
+            labeling.addLabelToState("init", 0);
+            components.stateLabeling = labeling;
+            return std::make_shared<storm::models::sparse::Mdp<ValueType>>(std::move(components));
+
+
+
+
+        }
+
+        template class ObservationTraceUnfolder<double>;
+        template class ObservationTraceUnfolder<storm::RationalFunction>;
+
+    }
+}
\ No newline at end of file
diff --git a/src/storm-pomdp/transformer/ObservationTraceUnfolder.h b/src/storm-pomdp/transformer/ObservationTraceUnfolder.h
new file mode 100644
index 000000000..feafe57e2
--- /dev/null
+++ b/src/storm-pomdp/transformer/ObservationTraceUnfolder.h
@@ -0,0 +1,18 @@
+#include "storm/models/sparse/Pomdp.h"
+
+namespace storm {
+    namespace pomdp {
+        template<typename ValueType>
+        class ObservationTraceUnfolder {
+
+        public:
+            ObservationTraceUnfolder(storm::models::sparse::Pomdp<ValueType> const& model);
+            std::shared_ptr<storm::models::sparse::Mdp<ValueType>> transform(std::vector<uint32_t> const& observations, std::vector<ValueType> const& risk);
+        private:
+            storm::models::sparse::Pomdp<ValueType> const& model;
+            std::vector<storm::storage::BitVector> statesPerObservation;
+
+        };
+
+    }
+}
\ No newline at end of file