ISSN:
1434-6036
Keywords:
PACS. 02.50.-r Probability theory, stochastic processes, and statistics - 05.45.Df Fractals - 05.40.-a Fluctuation phenomena, random processes, noise, and Brownian motion
Source:
Springer Online Journal Archives 1860-2000
Topics:
Physics
Notes:
Abstract: In this paper, we provide a simple, “generic” interpretation of multifractal scaling laws and multiplicative cascade process paradigms in terms of volatility correlations. We show that in this context 1/f power spectra, as recently observed in reference [23], naturally emerge. We then propose a simple solvable “stochastic volatility” model for return fluctuations. This model is able to reproduce most of recent empirical findings concerning financial time series: no correlation between price variations, long-range volatility correlations and multifractal statistics. Moreover, its extension to a multivariate context, in order to model portfolio behavior, is very natural. Comparisons to real data and other models proposed elsewhere are provided.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1007/s100510070131
Permalink