On a continuous-time stock price model with two mean reverting regimes

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Abstract

Motivated by the need to describe regime switching in stock prices, we introduce and study a stochastic process in continuous time with two regimes and one threshold driving the change in regimes. When the difference between the regimes is simply given by different sets of real-valued parameters for the drift and diffusion coefficients, we show that there are consistent estimators for the threshold as long as we know how to classify a given observation of the process as belonging to one of the two regimes.

Original languageEnglish
Title of host publicationStudies in Theoretical and Applied Statistics, Selected Papers of the Statistical Societies
EditorsJ. Lita da Silva, F. Caeiro, I. Natário, C. Braumann
Place of PublicationBerlin, Heidelberg
PublisherSpringer International Publishing Switzerland
Pages297-305
Number of pages9
ISBN (Electronic)978-3-642-34904-1
ISBN (Print)978-3-642-34903-4
DOIs
Publication statusPublished - 1 Jan 2013

Publication series

NameStudies in Theoretical and Applied Statistics, Selected Papers of the Statistical Societies
PublisherSpringer International Publishing
ISSN (Print)2194-7767
ISSN (Electronic)2194-7775

Keywords

  • Consistent estimator
  • Single threshold
  • Stochastic differential equation
  • Stock prex
  • Uhlenbeck process

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