Partial information about contagion risk, self-exciting processes and portfolio optimization : [Version 18 April 2013]
- 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.
| Author: | Nicole BrangerORCiDGND, Holger KraftGND, Christoph MeinerdingORCiDGND |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-315514 |
| URL: | http://ssrn.com/abstract=1633479 |
| DOI: | https://doi.org/10.2139/ssrn.1633479 |
| Parent Title (German): | SAFE working paper series ; No. 28 |
| Series (Serial Number): | SAFE working paper (28) |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2013 |
| Year of first Publication: | 2013 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2013/09/04 |
| Tag: | Asset Allocation; Contagion; Hidden State; Nonlinear Filtering; Self-exciting Processes |
| Issue: | Version 18 April 2013 |
| Page Number: | 42 |
| First Page: | 1 |
| Last Page: | 39 |
| HeBIS-PPN: | 348850468 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
