Stylised facts of financial time series and hidden Markov models in continuous time

Nystrup Peter, Madsen Henrik, Erik Lindström

Forskningsoutput: TidskriftsbidragArtikel i vetenskaplig tidskriftPeer review

15 Citeringar (SciVal)

Sammanfattning

Hidden Markov models are often applied in quantitative finance to capture the stylised facts of financial returns. They are usually discrete-time models and the number of states rarely exceeds two because of the quadratic increase in the number of parameters with the number of states. This paper presents an extension to continuous time where it is possible to increase the number of states with a linear rather than quadratic growth in the number of parameters. The possibility of increasing the number of states leads to a better fit to both the distributional and temporal properties of daily returns.
Originalspråkengelska
Sidor (från-till)1531-1541
TidskriftQuantitative Finance
Volym15
Utgåva9
DOI
StatusPublished - 2015

Bibliografisk information

Published online 2015-02-10.

Ämnesklassifikation (UKÄ)

  • Sannolikhetsteori och statistik

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