A conditional regime switching CAPM

Conditional Markov regime switching model applied to economic modelling

In this paper we discuss the calibration issues of regime switching models built on mean-reverting and local volatility processes combined with two Markov regime switching processes. In fact, the volatility structure of this model depends on a first exogenous Markov chain whereas the drift structure depends on a conditional Markov chain with respect to the first one. The structure is also assum...

Modeling the conditional distribution of interest rates as a regime - switching process

This paper develops a generalized regime-switching (GRS) model of the short-term interest rate. The model allows the short rate to exhibit both mean reversion and conditional heteroskedasticity and nests the popular generalized autoregressive conditional heteroskedasticity (GARCH) and square root process specifications. The conditional variance process accommodates volatility clustering and dep...

Regime Switching Garch Models

We develop univariate regime-switching GARCH (RS-GARCH) models wherein the conditional variance switches in time from one GARCH process to another. The switching is governed by a time-varying probability, specified as a function of past information. We provide sufficient conditions for geometric ergodicity and existence of moments. Because of path dependence, maximum likelihood estimation is no...

Regime - Switching Models

Regime-Switching Cointegration∗

We develop methods for Bayesian inference in vector error correction models which are subject to a variety of switches in regime (e.g. Markov switches in regime or structural breaks). An important aspect of our approach is that we allow both the cointegrating vectors and the number of cointegrating relationships to change when the regime changes. We show how Bayesian model averaging or model se...