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A note on the use of fractional Brownian motion for financial modeling

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  • Rostek, S.
  • Schöbel, R.

Abstract

In the second part of the past decade, the usage of fractional Brownian motion for financial models was stuck. The favorable time-series properties of fractional Brownian motion exhibiting long-range dependence came along with an apparently insuperable shortcoming: the existence of arbitrage. Within the last two years, several new models using fractional Brownian motion have been published. However, still the problem remains unsolved whether such models are reasonable choices from an economic perspective.

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  • Rostek, S. & Schöbel, R., 2013. "A note on the use of fractional Brownian motion for financial modeling," Economic Modelling, Elsevier, vol. 30(C), pages 30-35.
    • Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:30-35
    DOI: 10.1016/j.econmod.2012.09.003
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