This article discusses the pricing of derivatives in a continuous-time, hidden Markov-modulated, pure-jump asset price model. The hidden Markov chain modulating the pure-jump asset price model describes the evolution of the hidden state of an economy over time. The market model is incomplete. We...

We outline a two-stage estimation method for a Markov-switching Generalized Autoregressive Conditional Heteroscedastic (GARCH) model modulated by a hidden Markov chain. The first stage involves the estimation of a hidden Markov chain using the Vitberi algorithm given the model parameters. The...