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Subordinated Market Index Models: A Comparison

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Author Info
SIMON HURST ()
ECKHARD PLATEN ()
SVETLOZAR RACHEV ()

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Abstract

The paper compares various processes subordinated to the Wiener process to model the leptokurtic characteristics of index returns. Empirical analysis is performed on the Dow Jones and Nikkei 225 indexes. A good model to capture the typical tail behaviour of these indexes turns out to be a long Student t distributed one. Copyright Kluwer Academic Publishers 1997

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File URL: http://hdl.handle.net/10.1023/A:1009650313980
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Publisher Info
Article provided by Springer in its journal Asia-Pacific Financial Markets.

Volume (Year): 4 (1997)
Issue (Month): 2 (May)
Pages: 97-124
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Handle: RePEc:kap:apfinm:v:4:y:1997:i:2:p:97-124

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Web page: http://springerlink.metapress.com/link.asp?id=102851

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Related research
Keywords: Asset price model; subordination; leptokurtic; Student t distribution; symmetric generalised hyperbolic distribution;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-55, January. [Downloadable!] (restricted)
  2. Praetz, Peter D, 1972. "The Distribution of Share Price Changes," Journal of Business, University of Chicago Press, vol. 45(1), pages 49-55, January. [Downloadable!] (restricted)
  3. Hull, John C & White, Alan D, 1987. " The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, vol. 42(2), pages 281-300, June. [Downloadable!] (restricted)
  4. Blattberg, Robert C & Gonedes, Nicholas J, 1974. "A Comparison of the Stable and Student Distributions as Statistical Models for Stock Prices," Journal of Business, University of Chicago Press, vol. 47(2), pages 244-80, April. [Downloadable!] (restricted)
  5. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June. [Downloadable!] (restricted)
  6. Benoit Mandelbrot, 1967. "The Variation of Some Other Speculative Prices," Journal of Business, University of Chicago Press, vol. 40, pages 393. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mercik, Szymon & Weron, Rafal, 2002. "Origins of scaling in FX markets," MPRA Paper 2294, University Library of Munich, Germany. [Downloadable!]
  2. Yoshio Miyahara & Alexander Novikov, 2001. "Geometric Lévy Process Pricing Model," Research Paper Series 66, Quantitative Finance Research Centre, University of Technology, Sydney. [Downloadable!]
  3. E. Platen, . "A Minimal Financial Market Model," Sonderforschungsbereich 373 2000-91, Humboldt Universitaet Berlin.
    Other versions:
  4. Steven Kou, 2000. "A Jump Diffusion Model for Option Pricing with Three Properties: Leptokurtic Feature, Volatility Smile, and Analytical Tractability," Econometric Society World Congress 2000 Contributed Papers 0062, Econometric Society. [Downloadable!]
  5. Gao, Jiti, 2002. "Modeling long-range dependent Gaussian processes with application in continuous-time financial models," MPRA Paper 11973, University Library of Munich, Germany, revised 18 Sep 2003. [Downloadable!]
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