Related papers: Downside Risk Reduction Using Regime-Switching Sig…
This paper deals with the problem of asymptotically optimal detection of changes in regime-switching stochastic models. We need to divide the whole obtained sample of data into several sub-samples with observations belonging to different…
We study the problem of dynamically trading futures in a regime-switching market. Modeling the underlying asset price as a Markov-modulated diffusion process, we present a utility maximization approach to determine the optimal futures…
Regime-switching poses both problems and opportunities for portfolio managers. If a switch in the behaviour of the markets is not quickly detected it can be a source of loss, since previous trading positions may be inappropriate in the new…
In this paper, we investigate the problem of system identification for autonomous Markov jump linear systems (MJS) with complete state observations. We propose switched least squares method for identification of MJS, show that this method…
We study a multi-armed bandit problem where the rewards exhibit regime switching. Specifically, the distributions of the random rewards generated from all arms are modulated by a common underlying state modeled as a finite-state Markov…
In the regime switching extension of Black-Scholes-Merton model of asset price dynamics, one assumes that the volatility coefficient evolves as a hidden pure jump process. Under the assumption of Markov regime switching, we have considered…
Dynamic and evolving operational and economic environments present significant challenges for decision-making. We explore a simulation optimization problem characterized by non-stationary input distributions with regime-switching dynamics…
This paper studies the bail-out optimal dividend problem with regime switching under the constraint that the cumulative dividend strategy is absolutely continuous. We confirm the optimality of the regime-modulated refraction-reflection…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
In this paper, we consider the stability analysis of large-scale distributed networked control systems with random communication delays between linearly interconnected subsystems. The stability analysis is performed in the Markov jump…
Monitoring downside risk and upside risk to the key macroeconomic indicators is critical for effective policymaking aimed at maintaining economic stability. In this paper I propose a parametric framework for modelling and forecasting…
We consider a backward stochastic differential equation with jumps (BSDEJ) which is driven by a Brownian motion and a Poisson random measure. We present two candidate-approximations to this BSDEJ and we prove that the solution of each…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
This paper introduces a new type of risk measures, namely regime switching entropic risk measures, and study their applicability through simulations. The state of the economy is incorporated into the entropic risk formulation by using a…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
We investigate the problem of optimal dividend distribution for a company in the presence of regime shifts. We consider a company whose cumulative net revenues evolve as a Brownian motion with positive drift that is modulated by a finite…
A new jump diffusion regime-switching model is introduced, which allows for linking jumps in asset prices with regime changes. We prove the existence and uniqueness of the solution to the risk-sensitive asset management criterion…
Central Banks interventions are frequent in response to exogenous events with direct implications on financial market volatility. In this paper, we introduce the Asymmetric Jump Multiplicative Error Model (AJM), which accounts for a…
We study optimal investment strategies that maximize expected utility from consumption and terminal wealth in a pure-jump asset price model with Markov-modulated (regime switching) jump-size distributions. We give sufficient conditions for…
In this paper, we investigate an optimal investment problem associated with proportional portfolio insurance (PPI) strategies in the presence of jumps in the underlying dynamics. PPI strategies enable investors to mitigate downside risk…