A Correction Note on: When the “Bull” Meets the “Bear”—A First Passage Time Problem for a Hidden Markov Process

Methodology and Computing in Applied Probability volume 16, pages771–776(2014)Cite this article

Abstract

Guo (Methodol Comput Appl Probab 3(2):135–143, 2001a) derived the Laplace transform of the first-passage time in a 2-state Markov-switching model and gave one of the pioneering works improving the analytical tractability of Markov-switching models. However, the Laplace transforms in her paper are wrong. This short note provides the correct expression and an alternative proof using the matrix Wiener–Hopf technique.

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Affiliations

  1. Lehrstuhl für Finanzmathematik (M13), Technische Universität München, Parkring 11, 85748, Garching-Hochbrück, Germany

    Peter Hieber

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  1. Peter Hieber
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Correspondence to Peter Hieber.

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Hieber, P. A Correction Note on: When the “Bull” Meets the “Bear”—A First Passage Time Problem for a Hidden Markov Process. Methodol Comput Appl Probab 16, 771–776 (2014). https://doi.org/10.1007/s11009-013-9355-6

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Keywords

  • Markov switching
  • Regime switching
  • First-passage time
  • Laplace transform

AMS 2000 Subject Classifications

  • 60J27
  • 60G40
  • 44A10