Questions tagged [market-regimes]
The market-regimes tag has no usage guidance.
20
questions
0
votes
1
answer
35
views
Combining discontinuous opposing returns into a single continuous function
See the function here.
It's my intent to measure the expected log return of the optimal trade with regards to long/short positions in a trading range. The trading range has an equilibrium where the ...
- 103
1
vote
0
answers
85
views
Trying to recreate results from a research paper on HMM and Kolmogorov-Smirnov Test for forecasting regime switching on SP500
I am trying to recreate this research: Regime-Switching Factor Investing with Hidden Markov Models,
by Matthew Wang, Yi-Hong Lin and Ilya Mikhelson
https://www.mdpi.com/1911-8074/13/12/311/htm
My ...
- 111
3
votes
1
answer
268
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 ...
- 31
1
vote
0
answers
58
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, $...
- 11
0
votes
0
answers
79
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
1
vote
1
answer
113
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 ...
- 2,815
2
votes
0
answers
88
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
0
answers
37
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, ...
- 1,346
2
votes
0
answers
73
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. ...
- 173
1
vote
1
answer
82
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
1
vote
0
answers
36
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 ...
- 233
1
vote
1
answer
119
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
5
answers
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 ...
- 400
9
votes
1
answer
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 ...
- 665
0
votes
2
answers
120
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 ...
- 3
5
votes
1
answer
353
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:
...
- 151
21
votes
2
answers
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 ...
- 789
25
votes
4
answers
4k
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 ...
- 705
18
votes
3
answers
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 ...
- 3,192
18
votes
2
answers
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 ...
- 26.7k