Markov-Switching GARCH Models in R: The MSGARCH Package

Keywords: GARCH, MSGARCH, Markov–switching, conditional volatility, risk management
Webpages: https://CRAN.R-project.org/package=MSGARCH, https://github.com/keblu/MSGARCH
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 efficiently 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.