Questions tagged [market-regimes]
The market-regimes tag has no usage guidance.
18
questions
2
votes
0answers
176 views
PortfolioAnalytics and regime switching issue
I've been playing around with the R package PortfolioAnalytics and I have spent more time than I'm willing to admit to try and resolve this issue:
When I follow the regime switching example with the ...
1
vote
0answers
50 views
Put-call parity under a regime-switching model
I need some help.
I'm given $J$ different regimes, each one characterized by its own parameters $(r_i, \delta_i,\sigma_i,...)$ with $i\in \mathcal{J}= \{1,2,...,J\}$ ($r$ = risk-free interest rate, $...
0
votes
0answers
60 views
Is variance of residuals of Markov switching GARCH model regime specific?
I'm using MSGARCH package in R. By return_data/Volatility(fit.model), I get the residuals. When I calculate the standard deviation of the residuals, it turns out that it's close to 1 for all residuals....
1
vote
1answer
91 views
How to simulate asset prices/returns that display market regimes?
Are there any techniques that can make a multivariate random number generating process for stock prices/returns, like geometric Brownian motion via Cholesky, also include the simulation of a finite ...
2
votes
0answers
75 views
modelling known regime shifts
I wish to model a price time series with a known regime shift: electricity price before during and after the introduction of a carbon price. The time series looks like this:
you can see the jump in ...
1
vote
0answers
35 views
Stochastic process with determinstic frequency of regime changes
Suppose that I have an OU process. For instance, assume that I want to model the interest rates. Suppose that regime change is known ex ante, and is deterministic in terms of frequency (For instance, ...
2
votes
0answers
68 views
Risk-Neutral Pricing with Regime Switching
As the title suggests, I am currently trying to implement a dual regime-switching options pricing model. In its simplest form, I am fitting a risk-neutral GARCH(1,1) to a crash and normal regime. ...
1
vote
1answer
76 views
Are Indices Regulated
Suppose that a bank (or any regulated body) wants to sell and ETF, replicating some index. Does that replicator have to adhere to the Basel accords?
Similarly, if a bank (or any regulated body) ...
1
vote
0answers
31 views
Given historical performance of a financial index, how to categorise different historical periods depending on the market regime at the time?
We are trying to work on a Machine Learning application to attempt to predict market regime changes (bull, bear, stale?). Generally a ML algorithm needs well defined training data for establishing its ...
1
vote
1answer
100 views
Value at Risk for normal r.v. with shock (regimes)
I am struggling to understand how was this simple Value-at-Risk calculated. It's Example 1 in Daníelsson, Jón, et al. "Fat tails, VaR and subadditivity." Journal of econometrics 172.2 (2013): 283-291 (...
18
votes
5answers
14k views
What is a regime switch?
I've come across the term regime switch in volatilities when reading about the modelling of interest rates but could not find a definition for a regime switch and what a regime is.
Can somebody give ...
9
votes
1answer
1k views
Transition Between Volatility Regimes
Emanuel Derman wrote a great paper in 1999 about volatility regimes and the adjustments the market makes during these periods (sticky strike, sticky implied tree, sticky delta, etc).
Has any ...
0
votes
2answers
106 views
Regime switching model getting data
I am trying to find a dataset (oil prices, S&P index, DAX returns etc.) in order to visualize the high volatility and low volatility periods in a plot.
So far, I have not found a dataset that has ...
5
votes
1answer
305 views
Comprehensive List of Regime Switching/Change-Point Detection Models
I am looking for a comprehensive list of regime switching/change point models/techniques which can be used to model different regimes / change points in financial time series. What I found so far are:
...
21
votes
2answers
7k views
Regime-Switching Model for detecting market shifts
I'm always wondering whether anyone has utilized regime-switching models successfully in forecasting or trading.
Academia has long discussed this topic in-depth, such as using Regime Switching ...
24
votes
4answers
3k views
How do I adjust a correlation matrix whose elements are generated from different market regimes?
Say I want to calculate a correlation matrix for 50 stocks using 3-year historical daily data. And there are some stocks that were recently listed for one year.
This is not technically challenging ...
18
votes
3answers
3k views
How to detect regime change when estimating asset correlation from historical time series?
Suppose I have two asset time series, $X_t$ and $Y_t$, and I'm estimating their correlation from historical data. I'd like to apply some systematic criterion to estimate what time window I should use ...
18
votes
2answers
3k views
How to build a regime-switching model which knows its own limits?
In recent months I've come to the conclusion that there are not only certain regimes in the markets (like bear or bull) but phases where all models fail because we are in uncharted territory. The ...
