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The application of continuous-time random walks in finance and economics

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  • Scalas, Enrico

Abstract

This paper reviews some applications of continuous time random walks (CTRWs) to Finance and Economics. It is divided into two parts. The first part deals with the connection between CTRWs and anomalous diffusion. In particular, a simplified version of the well-scaled transition of CTRWs to the diffusive or hydrodynamic limit is presented. In the second part, applications of CTRWs to the ruin theory of insurance companies, to growth and inequality processes and to the dynamics of prices in financial markets are outlined and briefly discussed.

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Bibliographic Info

Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

Volume (Year): 362 (2006)
Issue (Month): 2 ()
Pages: 225-239

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Handle: RePEc:eee:phsmap:v:362:y:2006:i:2:p:225-239

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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

Related research

Keywords: Continuous time random walks; Fractional calculus; Finance; Economics; Econophysics;

References

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Citations

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Cited by:
  1. D’Amico, Guglielmo & Janssen, Jacques & Manca, Raimondo, 2009. "European and American options: The semi-Markov case," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(15), pages 3181-3194.
  2. Bottazzi, Giulio, 2009. "On the irreconcilability of Pareto and Gibrat laws," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(7), pages 1133-1136.
  3. Politi, Mauro & Scalas, Enrico, 2008. "Fitting the empirical distribution of intertrade durations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(8), pages 2025-2034.
  4. Javier Villarroel & Miquel Montero, 2008. "On properties of Continuous-Time Random Walks with Non-Poissonian jump-times," Papers 0812.2148, arXiv.org.
  5. Scalas, Enrico & Gallegati, Mauro & Guerci, Eric & Mas, David & Tedeschi, Alessandra, 2006. "Growth and allocation of resources in economics: The agent-based approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 370(1), pages 86-90.
  6. Andrzej Buda, 2011. "Life time of correlation between stocks prices on established and emerging markets," Papers 1105.6272, arXiv.org.
  7. Masanao Aoki, 2006. "Growth Patterns of Two Types of Macro-Models: Limiting Behavior of One-and Two-Parameter Poisson-Dirichlet Models," CIRJE F-Series CIRJE-F-446, CIRJE, Faculty of Economics, University of Tokyo.
  8. Sazuka, Naoya & Inoue, Jun-ichi & Scalas, Enrico, 2009. "The distribution of first-passage times and durations in FOREX and future markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(14), pages 2839-2853.
  9. Jiang, Zhi-Qiang & Chen, Wei & Zhou, Wei-Xing, 2008. "Scaling in the distribution of intertrade durations of Chinese stocks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(23), pages 5818-5825.
  10. Vallois, Pierre & Tapiero, Charles S., 2007. "Memory-based persistence in a counting random walk process," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 386(1), pages 303-317.
  11. Ni, Xiao-Hui & Jiang, Zhi-Qiang & Gu, Gao-Feng & Ren, Fei & Chen, Wei & Zhou, Wei-Xing, 2010. "Scaling and memory in the non-Poisson process of limit order cancelation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(14), pages 2751-2761.
  12. Masanao Aoki, . "A New Non-ergodic Endogenous Growth Model," UCLA Economics Online Papers 392, UCLA Department of Economics.
  13. Kuroda, Koji & Murai, Joshin, 2007. "Limit theorems in financial market models," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 383(1), pages 28-34.
  14. Jiang, Zhi-Qiang & Chen, Wei & Zhou, Wei-Xing, 2009. "Detrended fluctuation analysis of intertrade durations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(4), pages 433-440.
  15. Tóth, Bence & Kertész, János, 2009. "Accurate estimator of correlations between asynchronous signals," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(8), pages 1696-1705.
  16. Enrico Scalas & Mauro Politi, 2012. "A parsimonious model for intraday European option pricing," Papers 1202.4332, arXiv.org.
  17. Bertram, William K., 2008. "Measuring time dependent volatility and cross-sectional correlation in Australian equity returns," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(13), pages 3183-3191.

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