Abstract
In this paper we develop a stochastic model incorporating a double-Markov modulated mean-reversion model. Unlike a price process the basis process X can take positive or negative values. This model is based on an explicit discretisation of the corresponding continuous time dynamics. The new feature in our model is that we suppose the mean reverting level in our dynamics as well as the noise coefficient can change according to the states of some finite-state Markov processes which could be the economy and some other unseen random phenomenon.
Keywords
Publication details
- DOI
- 10.24200/squjs.vol13iss0pp55-62
- Journal
- Sultan Qaboos University Journal for Science, 13, 55
- Publisher
- Sultan Qaboos University
- Open access
- Gold open access
- License
- CC BY 4.0
Cite this article
APA 7
Malcom, W. P., Aggoun, L., & Al-Lawati, M. (2008). On Markov Modulated Mean-Reverting Price-Difference Models. Sultan Qaboos University Journal for Science, 13, 55. https://doi.org/10.24200/squjs.vol13iss0pp55-62
MLA 9
Malcom, W. P., et al. "On Markov Modulated Mean-Reverting Price-Difference Models." Sultan Qaboos University Journal for Science, vol. 13, 2008, pp. 55. https://doi.org/10.24200/squjs.vol13iss0pp55-62.
Chicago (author–date)
Malcom, W. P., Lakhdar Aggoun, and Mohamed Al-Lawati. 2008. "On Markov Modulated Mean-Reverting Price-Difference Models." Sultan Qaboos University Journal for Science 13: 55. https://doi.org/10.24200/squjs.vol13iss0pp55-62.
Harvard
Malcom, W. P., Aggoun, L. and Al-Lawati, M. (2008) 'On Markov Modulated Mean-Reverting Price-Difference Models', Sultan Qaboos University Journal for Science, 13, pp. 55. doi:10.24200/squjs.vol13iss0pp55-62.
Vancouver
Malcom WP, Aggoun L, Al-Lawati M. On Markov Modulated Mean-Reverting Price-Difference Models. Sultan Qaboos University Journal for Science. 2008;13:55. doi:10.24200/squjs.vol13iss0pp55-62
IEEE
W. P. Malcom, L. Aggoun, and M. Al-Lawati, "On Markov Modulated Mean-Reverting Price-Difference Models," Sultan Qaboos University Journal for Science, vol. 13, pp. 55, 2008, doi: 10.24200/squjs.vol13iss0pp55-62.