Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.14/138687
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- Title
- A Higher-order Markov-switching model for risk measurement
- Related
- Computers and mathematics with applications, Vol. 58, Issue 1, (2009), p.1-10
- DOI
- 10.1016/j.camwa.2008.10.099
- Publisher
- Elsevier
- Date
- 2009
- FoR/RFCD Code(s)
-
010200 Applied Mathematics
080200 Computation Theory and Mathematics
010300 Numerical and Computational Mathematics
- Author/Creator
- Siu, T. K
- Author/Creator
- Ching, W. K
- Author/Creator
- Fung, E
- Author/Creator
- Ng, M
- Author/Creator
- Li, X
- Description
- In this paper, we introduce a High-order Markov-Switching (HMS) model for measuring the risk of a portfolio. We suppose that the rate of return from a risky portfolio follows an HMS model with the drift and the volatility modulated by a discrete-time weak Markov chain. The states of the weak Markov chain are interpreted as observable states of an economy. We adopt the Value-at-Risk (VaR) as a metric for market risk quantification and examine the high-order effect of the underlying Markov chain on the risk measures via backtesting.
- Description
- 10 page(s)
- Subject Keyword
- 010200 Applied Mathematics
- Subject Keyword
- 080200 Computation Theory and Mathematics
- Subject Keyword
- 010300 Numerical and Computational Mathematics
- Subject Keyword
- Value-at-Risk
- Subject Keyword
- Higher-order Markov chain process
- Subject Keyword
- Portfolio
- Subject Keyword
- Regime-switching
- Subject Keyword
- Risk management
- Subject Keyword
- Weak Markov chain process
- Resource Type
- journal article
- Organisation
- Macquarie University. Dept. of Actuarial Studies
- Identifier
- http://hdl.handle.net/1959.14/138687
- Identifier
- ISSN:0898-1221
- Identifier
- mq-rm-2009002172
- Language
- eng
- Reviewed
