A mixture price trend model for long-term risk management

Eric S. Fung, Wai Ki Ching, Tak Kuen Ken Siu

Research output: Chapter in Book/Report/Conference proceedingChapter

1 Citation (Scopus)

Abstract

In financial forecasting, a long-standing challenging issue is to develop an appropriate model for forecasting long-term risk management of enterprises. In this chapter, using financial markets as an example, we introduce a mixture price trend model for long-term forecasts of financial asset prices with a view to applying it for long-term financial risk management. The key idea of the mixture price trend model is to provide a general and flexible way to incorporate various price trend behaviors and to extract information from price trends for long-term forecasting. Indeed, the mixture price trend model can incorporate model uncertainty in the price trend model, which is a key element for risk management and is overlooked in some of the current literatures. The mixture price trend model also allows the incorporation of users' subjective views on long-term price trends. An efficient estimation method is introduced. Statistical analysis of the proposed model based on real data will be conducted to illustrate the performance of the model.

Original languageEnglish
Title of host publicationBusiness intelligence in economic forecasting
Subtitle of host publicationTechnologies and techniques
EditorsJue Wang, Shouyang Wang
Place of PublicationHershey, PA
PublisherIGI Global
Pages157-173
Number of pages17
ISBN (Electronic)9781615206308
ISBN (Print)9781615206292
DOIs
Publication statusPublished - Jun 2010

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    Fung, E. S., Ching, W. K., & Siu, T. K. K. (2010). A mixture price trend model for long-term risk management. In J. Wang, & S. Wang (Eds.), Business intelligence in economic forecasting: Technologies and techniques (pp. 157-173). Hershey, PA: IGI Global. https://doi.org/10.4018/978-1-61520-629-2.ch009