Regime switching volatility calibration by the Baum-Welch method

Please use this identifier to cite or link to this item: http://bura.brunel.ac.uk/handle/2438/4424

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DC Field	Value	Language
dc.contributor.author	Mitra, S	-
dc.contributor.author	Date, P	-
dc.date.accessioned	2010-06-15T10:36:48Z	-
dc.date.available	2010-06-15T10:36:48Z	-
dc.date.issued	2010	-
dc.identifier.citation	Journal of Computational and Applied Mathematics. 234(12): 3243–3260, Oct 2010	en
dc.identifier.issn	0377-042	-
dc.identifier.uri	http://www.sciencedirect.com/science/article/pii/S0377042710002190	en
dc.identifier.uri	http://bura.brunel.ac.uk/handle/2438/4424	-
dc.description.abstract	Regime switching volatility models provide a tractable method of modelling stochastic volatility. Currently the most popular method of regime switching calibration is the Hamilton filter. We propose using the Baum-Welch algorithm, an established technique from Engineering, to calibrate regime switching models instead. We demonstrate the Baum-Welch algorithm and discuss the significant advantages that it provides compared to the Hamilton filter. We provide computational results of calibrating and comparing the performance of the Baum-Welch and the Hamilton filter to S&P 500 and Nikkei 225 data, examining their performance in and out of sample.	en
dc.language.iso	en	en
dc.publisher	Elsevier	en
dc.subject	Regime switching	en
dc.subject	Stochastic volatility	en
dc.subject	Calibration	en
dc.subject	Hamilton filter	en
dc.subject	Baum-Welch	en
dc.title	Regime switching volatility calibration by the Baum-Welch method	en
dc.type	Research Paper	en
Appears in Collections:	Dept of Mathematics Research Papers Mathematical Sciences

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