This paper employes a parametric model of structural breaks in the mean of stock returns which allows them to be endogenously driven by large positive or negative stock market return shocks. These shocks can be taken to reflect important market announcements, monetary policy regime shifts and/or...

This paper evaluates the VaR forecasting performance of the Markov regime switching (MRS) based volatility models, allowing for EGARCH effects. As is argued in the literature, this extension of the MRS model model may improve its forecasting performance due to its ability to capture leverage...

In this paper we introduce a discrete time pricing model for a European call option when the log-return of the underlying stock (asset) is subject to discontinuous market regime type of shifts in its mean or volatility whose risk can be priced in the market. The paper shows how to estimate this...