Volatility Estimation And Price Prediction Using A Hidden Markov Model With Empirical Study
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Volatility Estimation And Price Prediction Using A Hidden Markov Model With Empirical Study
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Author : Pei Yin
language : en
Publisher:
Release Date : 2007
Volatility Estimation And Price Prediction Using A Hidden Markov Model With Empirical Study written by Pei Yin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Capital investments categories.
This work provides a solid development of a hidden Markov model (HMM) from the economic insight to the mathematic formulation. In this model, we assume both drift and volatility of the security return process are driven by certain underlying economic forces which evolve together as a finite-state, time-invariant Markov chain. Unfortunately, this chain is unobservable. Through stochastic filtering techniques and EM algorithm with modified iteration steps, we estimate the state space and transition matrix of the Markov chain, as well as the state spaces of the drift and volatility. With these estimates we can smooth and predict the drift and volatility processes and apply them to the security price prediction. On an empirical level, we first use Monte Carlo simulation to show the robustness of our estimates, and then implement HMM on various data sets of historical prices including: major indices, bonds, mutual funds, common stocks, and ETFs to back test the predicability of the model. Moreover, we compare the applicability of HMM with the well established GARCH(1,1) model, as far as the prediction performance is concerned, our results indicate HMM outperforms GARCH(1,1).
Hidden Markov Models
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Author : Ramaprasad Bhar
language : en
Publisher: Springer Science & Business Media
Release Date : 2006-04-18
Hidden Markov Models written by Ramaprasad Bhar and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-04-18 with Business & Economics categories.
Markov chains have increasingly become useful way of capturing stochastic nature of many economic and financial variables. Although the hidden Markov processes have been widely employed for some time in many engineering applications e.g. speech recognition, its effectiveness has now been recognized in areas of social science research as well. The main aim of Hidden Markov Models: Applications to Financial Economics is to make such techniques available to more researchers in financial economics. As such we only cover the necessary theoretical aspects in each chapter while focusing on real life applications using contemporary data mainly from OECD group of countries. The underlying assumption here is that the researchers in financial economics would be familiar with such application although empirical techniques would be more traditional econometrics. Keeping the application level in a more familiar level, we focus on the methodology based on hidden Markov processes. This will, we believe, help the reader to develop more in-depth understanding of the modeling issues thereby benefiting their future research.
Approximate Bayesian Estimation Of Stochastic Volatility In Mean Models Using Hidden Markov Models Empirical Evidence From Stock Latin American Markets
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Author : Carlos A. Abanto-Valle
language : en
Publisher:
Release Date : 2021
Approximate Bayesian Estimation Of Stochastic Volatility In Mean Models Using Hidden Markov Models Empirical Evidence From Stock Latin American Markets written by Carlos A. Abanto-Valle and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
A Study Of Market Microstructure Volatility Using Hidden Markov Chain
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Author : Soo Chen Wong
language : en
Publisher:
Release Date : 2000
A Study Of Market Microstructure Volatility Using Hidden Markov Chain written by Soo Chen Wong and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with categories.
Handbook Of Financial Time Series
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Author : Torben Gustav Andersen
language : en
Publisher: Springer Science & Business Media
Release Date : 2009-04-21
Handbook Of Financial Time Series written by Torben Gustav Andersen and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-04-21 with Business & Economics categories.
The Handbook of Financial Time Series gives an up-to-date overview of the field and covers all relevant topics both from a statistical and an econometrical point of view. There are many fine contributions, and a preamble by Nobel Prize winner Robert F. Engle.
Applied Quantitative Finance
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Author : Wolfgang Karl Härdle
language : en
Publisher: Springer
Release Date : 2017-08-02
Applied Quantitative Finance written by Wolfgang Karl Härdle and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-08-02 with Business & Economics categories.
This volume provides practical solutions and introduces recent theoretical developments in risk management, pricing of credit derivatives, quantification of volatility and copula modeling. This third edition is devoted to modern risk analysis based on quantitative methods and textual analytics to meet the current challenges in banking and finance. It includes 14 new contributions and presents a comprehensive, state-of-the-art treatment of cutting-edge methods and topics, such as collateralized debt obligations, the high-frequency analysis of market liquidity, and realized volatility. The book is divided into three parts: Part 1 revisits important market risk issues, while Part 2 introduces novel concepts in credit risk and its management along with updated quantitative methods. The third part discusses the dynamics of risk management and includes risk analysis of energy markets and for cryptocurrencies. Digital assets, such as blockchain-based currencies, have become popular b ut are theoretically challenging when based on conventional methods. Among others, it introduces a modern text-mining method called dynamic topic modeling in detail and applies it to the message board of Bitcoins. The unique synthesis of theory and practice supported by computational tools is reflected not only in the selection of topics, but also in the fine balance of scientific contributions on practical implementation and theoretical concepts. This link between theory and practice offers theoreticians insights into considerations of applicability and, vice versa, provides practitioners convenient access to new techniques in quantitative finance. Hence the book will appeal both to researchers, including master and PhD students, and practitioners, such as financial engineers. The results presented in the book are fully reproducible and all quantlets needed for calculations are provided on an accompanying website. The Quantlet platform quantlet.de, quantlet.com, quantlet.org is an integrated QuantNet environment consisting of different types of statistics-related documents and program codes. Its goal is to promote reproducibility and offer a platform for sharing validated knowledge native to the social web. QuantNet and the corresponding Data-Driven Documents-based visualization allows readers to reproduce the tables, pictures and calculations inside this Springer book.
Asset Price Dynamics Volatility And Prediction
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Author : Stephen J. Taylor
language : en
Publisher: Princeton University Press
Release Date : 2011-02-11
Asset Price Dynamics Volatility And Prediction written by Stephen J. Taylor and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-02-11 with Business & Economics categories.
This book shows how current and recent market prices convey information about the probability distributions that govern future prices. Moving beyond purely theoretical models, Stephen Taylor applies methods supported by empirical research of equity and foreign exchange markets to show how daily and more frequent asset prices, and the prices of option contracts, can be used to construct and assess predictions about future prices, their volatility, and their probability distributions. Stephen Taylor provides a comprehensive introduction to the dynamic behavior of asset prices, relying on finance theory and statistical evidence. He uses stochastic processes to define mathematical models for price dynamics, but with less mathematics than in alternative texts. The key topics covered include random walk tests, trading rules, ARCH models, stochastic volatility models, high-frequency datasets, and the information that option prices imply about volatility and distributions. Asset Price Dynamics, Volatility, and Prediction is ideal for students of economics, finance, and mathematics who are studying financial econometrics, and will enable researchers to identify and apply appropriate models and methods. It will likewise be a valuable resource for quantitative analysts, fund managers, risk managers, and investors who seek realistic expectations about future asset prices and the risks to which they are exposed.
Hidden Markov Models In Finance
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Author : Rogemar S. Mamon
language : en
Publisher: Springer
Release Date : 2014-05-14
Hidden Markov Models In Finance written by Rogemar S. Mamon and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-05-14 with Business & Economics categories.
Since the groundbreaking research of Harry Markowitz into the application of operations research to the optimization of investment portfolios, finance has been one of the most important areas of application of operations research. The use of hidden Markov models (HMMs) has become one of the hottest areas of research for such applications to finance. This handbook offers systemic applications of different methodologies that have been used for decision making solutions to the financial problems of global markets. As the follow-up to the authors’ Hidden Markov Models in Finance (2007), this offers the latest research developments and applications of HMMs to finance and other related fields. Amongst the fields of quantitative finance and actuarial science that will be covered are: interest rate theory, fixed-income instruments, currency market, annuity and insurance policies with option-embedded features, investment strategies, commodity markets, energy, high-frequency trading, credit risk, numerical algorithms, financial econometrics and operational risk. Hidden Markov Models in Finance: Further Developments and Applications, Volume II presents recent applications and case studies in finance and showcases the formulation of emerging potential applications of new research over the book’s 11 chapters. This will benefit not only researchers in financial modeling, but also others in fields such as engineering, the physical sciences and social sciences. Ultimately the handbook should prove to be a valuable resource to dynamic researchers interested in taking full advantage of the power and versatility of HMMs in accurately and efficiently capturing many of the processes in the financial market.
Finite Mixture And Markov Switching Models
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Author : Sylvia Frühwirth-Schnatter
language : en
Publisher: Springer Science & Business Media
Release Date : 2006-11-24
Finite Mixture And Markov Switching Models written by Sylvia Frühwirth-Schnatter and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-11-24 with Mathematics categories.
The past decade has seen powerful new computational tools for modeling which combine a Bayesian approach with recent Monte simulation techniques based on Markov chains. This book is the first to offer a systematic presentation of the Bayesian perspective of finite mixture modelling. The book is designed to show finite mixture and Markov switching models are formulated, what structures they imply on the data, their potential uses, and how they are estimated. Presenting its concepts informally without sacrificing mathematical correctness, it will serve a wide readership including statisticians as well as biologists, economists, engineers, financial and market researchers.
Hidden Markov Models For Time Series
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Author : Walter Zucchini
language : en
Publisher: CRC Press
Release Date : 2017-12-19
Hidden Markov Models For Time Series written by Walter Zucchini and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-12-19 with Mathematics categories.
Hidden Markov Models for Time Series: An Introduction Using R, Second Edition illustrates the great flexibility of hidden Markov models (HMMs) as general-purpose models for time series data. The book provides a broad understanding of the models and their uses. After presenting the basic model formulation, the book covers estimation, forecasting, decoding, prediction, model selection, and Bayesian inference for HMMs. Through examples and applications, the authors describe how to extend and generalize the basic model so that it can be applied in a rich variety of situations. The book demonstrates how HMMs can be applied to a wide range of types of time series: continuous-valued, circular, multivariate, binary, bounded and unbounded counts, and categorical observations. It also discusses how to employ the freely available computing environment R to carry out the computations. Features Presents an accessible overview of HMMs Explores a variety of applications in ecology, finance, epidemiology, climatology, and sociology Includes numerous theoretical and programming exercises Provides most of the analysed data sets online New to the second edition A total of five chapters on extensions, including HMMs for longitudinal data, hidden semi-Markov models and models with continuous-valued state process New case studies on animal movement, rainfall occurrence and capture-recapture data