Xi, Xiaojing; Mamon, Rogemar - In: Economic Modelling 28 (2011) 1-2, pp. 36-46
We introduce a weak hidden Markov model (WHMM) in an attempt to capture more accurately the evolution of a risky asset. The log returns of assets are modulated by a weak or higher-order Markov chain with finite-state space. In particular, the optimal estimates of the second-order Markov chain...
