GARCH volatility models with fixed parameters are too restrictive for long time series due to breaks in the volatility process. Flexible alternatives are Markov-switching GARCH and change-point GARCH models. They require estimation by MCMC methods due to the path dependence problem. An unsolved...

Change-point time series specifications constitute flexible models that capture unknown structural changes by allowing for switches in the model parameters. Nevertheless most models suffer from an over-parametrization issue since typically only one latent state variable drives the switches in...