29 Pages Posted: 2 Oct 2016 Last revised: 23 Jan 2017
Date Written: September 30, 2016
Markov-switching GARCH models have become popular to model the structural break in the conditional variance dynamics of financial time series. In this paper, we describe the R package MSGARCH which implements Markov-switching GARCH-type models very effficiently by using C object-oriented programming techniques. It allows the user to perform simulations as well as Maximum Likelihood and Bayesian estimation of a very large class of Markov-switching GARCH-type models. Risk management tools such as Value-at-Risk and Expected-Shortfall calculations are available. An empirical illustration of the usefulness of the R package MSGARCH is presented.
Keywords: GARCH, MSGARCH, Markov-switching, conditional volatility, risk management, R software
JEL Classification: C01, C24, C53, C58
Suggested Citation: Suggested Citation
Ardia, David and Bluteau, Keven and Boudt, Kris and Trottier, Denis-Alexandre, Markov-Switching GARCH Models in R: The MSGARCH Package (September 30, 2016). Available at SSRN: https://ssrn.com/abstract=2845809