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Erscheinungsjahr: 
2013
Schriftenreihe/Nr.: 
SAFE Working Paper No. 28
Verlag: 
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe, Frankfurt a. M.
Zusammenfassung: 
This paper compares two classes of models that allow for additional channels of correlation between asset returns: regime switching models with jumps and models with contagious jumps. Both classes of models involve a hidden Markov chain that captures good and bad economic states. The distinctive feature of a model with contagious jumps is that large negative returns and unobservable transitions of the economy into a bad state can occur simultaneously. We show that in this framework the filtered loss intensities have dynamics similar to self-exciting processes. Besides, we study the impact of unobservable contagious jumps on optimal portfolio strategies and filtering.
Schlagwörter: 
Asset Allocation
Contagion
Nonlinear Filtering
Hidden State
Selfexciting Processes
JEL: 
G01
G11
Persistent Identifier der Erstveröffentlichung: 
Dokumentart: 
Working Paper

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