Tuesday, August 5 -- Hidden Markov Models

1. (15 minutes) Multifractal model of asset returns review -- quick demo with increased resolution, which looks way better. Here

2. (30 minutes) Markov processes Worksheet 1

3. (50 minutes) Hidden Markov Models Worksheet 2

4. (10 minutes) Break

5. (35 minutes) Application of Hidden Markov models Worksheet 3, Worksheet 4, and Worksheet 5

6. (10 minutes) Stock trading
7. Reading Assignment:

   • Calvet and Fisher: How to Forecast Long Run Volatility Regime Switching and the Estimation of Multifractal Processes, 2004