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Robustification of Elliott's on-line EM algorithm for HMMs by Erlwein, Christina; Ruckdeschel, Peter is a scholarly article available to read on EtoBox.

What is Robustification of Elliott's on-line EM algorithm for HMMs about?

In this paper, we establish a robustification of an on-line algorithm for modelling asset prices within a hidden Markov model (HMM). In this HMM framework, parameters of the model are guided by a Markov chain in discrete time, parameters of the asset returns are therefore able to switch between different regimes. The parameters are estimated through an on-line algorithm, which utilizes incoming information from the market and leads to adaptive optimal estimates. We robustify this algorithm step by step against additive outliers appearing in the observed asset prices with the rationale to better handle possible peaks or missings in asset returns.

Author

Erlwein, Christina; Ruckdeschel, Peter

Published

2013

Language

EN