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In this paper, an embedded wavelet based image coding algorithm is described. The algorithm allows certain regions of the image to be coded losslessly so that they can be exactly recovered by the decoder, while the remaining part is coded in a lossy manner. This maintains high compression while meeting the requirement of having lossless regions of interest (ROIs) in certain applications, like medical imaging. All coding, regional and full image, is done in a naturally progressive way all the way up to lossless.
Nistér et al. (Wed,) studied this question.