Applications of HMM in Finance
Abstract
In this chapter, we provide a brief overview of the applications of Hidden Markov Models in finance, with a focus on their use in stock price prediction, mortgage-backed securities, and stock trading. Additionally, we will highlight key differences between Markov chains, regime-switching models, and Hidden Markov Models - distinctions that have often been overlooked in some published works on HMM and their applications in finance.
Fields of Study & Subjects
Stock Market Forecasting Methods
Stochastic processes and financial applications
Financial Risk and Volatility Modeling
Publication details
- Journal / source
- Chapman & Hall/CRC eBooks
- Pages
- 85–162
- Publication date
- 4 March 2026
- Language
- EN
- Document type
- Book chapter