Fast Converging and Robust Optimal Path Selection in Continuous-time Markov-switching GARCH Model

06/18/2019
by   Yinan Li, et al.
0

We propose CROPS, a fast Converging and Robust Optimal Path Selection algorithm for accurate identification of the underlying path that characterizes the volatility and structural changes in continuous-time and high-frequency time series (TS). We set up the continuous-time Markov-switching generalized autoregressive conditional heteroskedasticity (COMS-GARCH) process, based on which we study the properties and advantages of CROPS in handling irregular spacing and structural changes simultaneously in TS data. We employ the Gibbs sampler in the Bayesian framework to obtain the maximum a posterior estimates for the model parameters and identify the optimal path for the COMS-GARCH process. We incorporate the Bernoulli noise injection technique into the CROPS procedure improve the generalizability of the state path and volatility prediction based on an sequential ensemble of sub-TS data. We also establish the stability in the objective function in the presence of random perturbation in the observed TS. The properties of the CROPS procedure in COMS-GARCH are illustrated through simulation studies and demonstrated in a real currency exchange rate TS data set.

READ FULL TEXT

page 1

page 2

page 3

page 4

research
12/10/2018

Bayesian Approach for Parameter Estimation of Continuous-Time Stochastic Volatility Models using Fourier Transform Methods

We propose a two stage procedure for the estimation of the parameters of...
research
09/29/2021

Variational Inference for Continuous-Time Switching Dynamical Systems

Switching dynamical systems provide a powerful, interpretable modeling f...
research
03/04/2008

Multiscale Inference for High-Frequency Data

This paper proposes a novel multiscale estimator for the integrated vola...
research
04/14/2022

Multivariate Overnight GARCH-Itô Model with Applications in Large Volatility Matrix Estimation and Prediction

This paper introduces a unified multivariate overnight GARCH-Itô model f...
research
03/02/2018

Continuous-time GARCH process driven by semi-Lévy process

In this paper we study the simple semi-Lévy driven continuous-time gener...
research
08/03/2022

Quantum Analysis of Continuous Time Stochastic Process

The continuous time stochastic process is a mainstream mathematical inst...

Please sign up or login with your details

Forgot password? Click here to reset