We calibrate Markov regime-switching (MRS) models to mean daily spot prices from the EEX market. Our empirical study shows that (i) models with shifted spike regime distributions lead to more realistic models of electricity spot prices and that (ii) introducing heteroskedasticity in the base...

A new model - the factorial hidden Markov volatility (FHMV) model - is proposed for financial returns and their latent variances. It is also applicable to model directly realized variances. Volatility is modeled as a product of three components: a Markov chain driving volatility persistence, an...

We develop a Markov-Switching Autoregressive Conditional Intensity (MS-ACI) model with time-varying transitional parameters, and show that it can be reliably estimated via the Stochastic Approximation Expectation-Maximization algorithm. Applying our model to high-frequency transaction data, we...

This paper investigates inference and volatility forecasting using a Markov switching heteroscedastic model with a fat-tailed error distribution to analyze asymmetric effects on both the conditional mean and conditional volatility of financial time series. The motivation for extending the Markov...

The transmission mechanisms of volatility between markets can be characterized within a new Markov Switching bivariate model where the state of one variable feeds into the transition probability of the state of the other. A number of model restrictions and hypotheses can be tested to stress the...

In this paper, we propose a Markov Chain Quasi-Monte Carlo (MCQMC) approach for Bayesian estimation of a discrete-time version of the stochastic volatility (SV) model. The Bayesian approach represents a feasible way to estimate SV models. Under the conventional Bayesian estimation method for SV...

Volatility forecasts play a central role among equity risk measures. Besides traditional statistical models, modern forecasting techniques, based on machine learning, can readily be employed when treating volatility as a univariate, daily time-series. However, econometric studies have shown that...