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| Author: | Grauwe, P. De Dewachter, H. Veestraeten, D. |
| Title: | Price dynamics under stochastic process switching: some extensions and an application to EMU |
| Journal: | Journal of International Money and Finance
1999 : APR, VOL. 18:2, p. 195-224 |
| Index terms: | PRICES EUROPEAN MONETARY SYSTEM DYNAMIC MODELS |
| Language: | eng |
| Abstract: | In this paper the authors solve a particular type of stochastic process switching problem where the date of switching is fixed and known but the terminal price may depend on past prices. The authors derive closed-form solutions for the price dynamics of the asset before the terminal date and deduce the variance and jump components of these dynamics at the announcement. The authors subsequently extend the model to price dynamics prior to the announcement of the regime switch. |
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