Reference : CONTINUOUS TIME REGIME-SWITCHING MODEL APPLIED TO FOREIGN EXCHANGE RATE
Scientific journals : Article
Business & economic sciences : Macroeconomics & monetary economics
http://hdl.handle.net/10993/13272
CONTINUOUS TIME REGIME-SWITCHING MODEL APPLIED TO FOREIGN EXCHANGE RATE
English
Goutte, Stephane mailto [> >]
Zou, Benteng mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
2013
Mathematical Finance Letters
2013-8
Yes (verified by ORBilu)
International
2051-2929
[en] Foreign exchange rate ; Regime switching ; expectation-maximization algorithm
[en] The continuous time modified Cox-Ingersoll-Ross (1985) stochastic model is employed, combining with the Hamilton (1989) type Markov regime-switching framework, to study daily foreign exchange rates where all parameter values depend on the value of a continuous time Markov chain. The generalized Expectation-Maximization algorithm is applied to a more general class of regime switching models and used to study some exchange rate data. We compare the obtained results with non regime switching models and notice that the regime switching outcomes match much better the reality than the others without Markov switching; and two regimes in most of the cases are better than more regimes.
Researchers
http://hdl.handle.net/10993/13272
http://scik.org

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