The asset allocation is a practical problem for most institutional and private investors, who routinely deal with a wide variety of stocks, bonds and options. Evidence suggests that both the expected return and the volatility vary over time. Many studies find that the expected returns have...

Regime switching dynamic correlation (RSDC) model allows the correlations to be constant with the regimes themselves however, it differs across regimes. RSDC model has retained many good properties from CCC multivariate GARCH and DCC multivariate GARCH. For example, RSDC does not suffer from the...