Analytical Valuation of Compound Options Under Regime-Switching Dynamics

Insurers issuing segregated fund policies apply dynamic hedging to mitigate risks related to guarantees embedded in such policies. A typical industry practice consists of using fund mapping regressions to represent basis risk stemming from the imperfect correlation between the underlying fund and its corresponding hedging instruments. The current work discusses the implications of using fund mapping regressions when the joint dynamics of the underlying and hedging assets is a regime-switching process. The potential underestimation of capital requirements stemming from the use of a fund mapping regression under such dynamics is discussed. The magnitude of the latter phenomenon is quantified through simulations calibrated on market data.

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Identifying Qualitative Between-Subject and Within-Subject Variability: A Method for Clustering Regime-Switching Dynamics

Frontiers in Psychology ◽

10.3389/fpsyg.2020.01136 ◽

2020 ◽

Vol 11 ◽

Author(s):

Lu Ou ◽

Alejandro Andrade ◽

Rosa A. Alberto ◽

Arthur Bakker ◽

Timo Bechger

Keyword(s):

Regime Switching ◽

Switching Dynamics ◽

Subject Variability ◽

Within Subject Variability

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Discrete-time implementation of continuous-time filters with application to regime-switching dynamics estimation

Nonlinear Analysis Hybrid Systems ◽

10.1016/j.nahs.2019.08.001 ◽

2020 ◽

Vol 35 ◽

pp. 100814 ◽

Cited By ~ 1

Author(s):

Stefanie Grimm ◽

Christina Erlwein-Sayer ◽

Rogemar Mamon

Keyword(s):

Discrete Time ◽

Continuous Time ◽

Regime Switching ◽

Continuous Time Filters ◽

Switching Dynamics

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Cyclical causalities between the U.S. wholesale beef and feed prices: A Markov-switching approach

Economics and Business Letters ◽

10.17811/ebl.9.2.2020.135-145 ◽

2020 ◽

Vol 9 (2) ◽

pp. 135

Author(s):

Dicle Ozdemir

Keyword(s):

Regime Switching ◽

Transition Probability ◽

Markov Switching ◽

Nonlinear Effects ◽

Time Varying ◽

Leading Role ◽

Livestock Feed ◽

Switching Dynamics ◽

Meat Market ◽

The U.S

Abstract: This paper examines whether some major livestock feed prices as corn, sorghum, hay and barley play a leading role in the regime switching dynamics between two states of the beef price cycles and have nonlinear effects on wholesale beef market in the U.S. using time-varying transition probability Markov-switching autoregressive model (TVTP). The study reveals that real wholesale beef price movement in the U.S. red meat market exhibits a nonlinear two regimes pattern. This evidence indicates that livestock feed prices provides some predicted power to the model of beef price regime switching and supports livestock feed prices contributing to whether the beef price levels remains in high-mean regime.

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