Category Archives: Regime Switching

Stationarity and Fat Tails

In this post I am going to explore how, starting from the assumption of a stable, Gaussian distribution in a returns process, we evolve to a system that displays all the characteristics of empirical market data, notably time-dependent moments, high … Continue reading

Posted in Fat Tails, Mathematica, Regime Shifts, Regime Switching, Uncategorized, Volatility Modeling | Tagged , , , , , , | Comments Off

A Practical Application of Regime Switching Models to Pairs Trading

In the previous post I outlined some of the available techniques used for modeling market states.  The following is an illustration of how these techniques can be applied in practice.    You can download this post in pdf format here. The chart … Continue reading

Posted in ARMA, Econometrics, ETFs, Markov Model, Mean Reversion, Pairs Trading, Regime Switching, Statistical Arbitrage | Tagged , , , , , | Comments Off