Hidden Markov Models in Finance

✍ Scribed by Shu Wu, Yong Zeng (auth.), Rogemar S. Mamon, Robert J. Elliott (eds.)

• Publisher: Springer
• Year: 2007
• Tongue: English
• Leaves: 186
• Edition: 1
• Category: Library

✦ Synopsis

A number of methodologies have been employed to provide decision making solutions to a whole assortment of financial problems in today's globalized markets. Hidden Markov Models in Finance by Mamon and Elliott will be the first systematic application of these methods to some special kinds of financial problems; namely, pricing options and variance swaps, valuation of life insurance policies, interest rate theory, credit risk modeling, risk management, analysis of future demand and inventory level, testing foreign exchange rate hypothesis, and early warning systems for currency crises. This book provides researchers and practitioners with analyses that allow them to sort through the random "noise" of financial markets (i.e., turbulence, volatility, emotion, chaotic events, etc.) and analyze the fundamental components of economic markets. Hence, Hidden Markov Models in Finance provides decision makers with a clear, accurate picture of core financial components by filtering out the random noise in financial markets.

✦ Table of Contents

Front Matter....Pages I-XIX
An Exact Solution of the Term Structure of Interest Rate Under Regime-Switching Risk....Pages 1-14
The Term Structure of Interest Rates in a Hidden Markov Setting....Pages 15-30
On Fair Valuation of Participating Life Insurance Policies With Regime Switching....Pages 31-43
Pricing Options and Variance Swaps in Markov-Modulated Brownian Markets....Pages 45-68
Smoothed Parameter Estimation for a Hidden Markov Model of Credit Quality....Pages 69-90
Expected Shortfall Under a Model With Market and Credit Risks....Pages 91-100
Filtering of Hidden Weak Markov Chain -Discrete Range Observations....Pages 101-119
Filtering of a Partially Observed Inventory System....Pages 121-132
An empirical investigation of the unbiased forward exchange rate hypothesis in a regime switching market....Pages 133-153
Early Warning Systems for Currency Crises: A Regime-Switching Approach....Pages 155-184
Back Matter....Pages 185-186

✦ Subjects

Operations Research, Mathematical Programming