Stochastic modeling of regime shifts

Stochastic modeling of regime shifts

Probabilistic methods for modeling the distribution of regimes and their shifts over time are developed by drawing on statistical decision and limit theory of random sums. Multi-annual episodes of opposite sign are graphically and numerically represented by their duration, magnitude, and intensity. Duration is defined as the number of consecutive years above or below a reference line, magnitude...

Regime Shifts in Nonlinear Stochastic Optimal Control Problems∗

We develop a method of obtaining an asymptotic series of the value function of a stochastic optimal control problem over an unbounded domain with a finite number of irregularity points. These are points of non-differentiability of the value function of the corresponding deterministic problem. We apply singular perturbation methods to obtain the solution approximation in regions of regularity an...

Stochastic Modeling of Radiation Regime in Discontinuous Vegetation Canopies

A stochastic radiative transfer equation for the mean l( → X), cosine of polar angle of direction → X d( → X2 → X0), Dirac delta function field and its solution for the case of discontinuous vegetation canopies is discussed in this article. The equation set v(→r ), indicator function Fdir(k), extraterrestrial solar radiance at the top of satisfies the law of energy conservation and is amenable ...

Regime Shifts and Volatility Spillovers

A standard capital asset pricing model is extended to allow for stochastic shifts in the volatility of the news process. This model is then estimated on bivariate stock market data to separate two exogenous news processes – a world and a domestic. The results indicate that the influence of the world news process on the Swedish stock market has increased significantly over the period 1970-1995. ...

Macroeconomic Regimes and Regime Shifts