A contribution to the systematics of stochastic volatility models
AbstractWe compare systematically several classes of stochastic volatility models of stock market fluctuations. We show that the long-time return distribution is either Gaussian or develops a power-law tail, while the short-time return distribution has generically a stretched-exponential form, but can assume also an algebraic decay, in the family of models which we call ``GARCH''-type. The intermediate regime is found in the exponential Ornstein-Uhlenbeck process. We calculate also the decay of the autocorrelation function of volatility.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1009.2696.
Date of creation: Sep 2010
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Publication status: Published in Physica A, 389 (2010) 3230-3239
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-ETS-2010-09-25 (Econometric Time Series)
- NEP-RMG-2010-09-25 (Risk Management)
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- Cassidy, Daniel T. & Hamp, Michael J. & Ouyed, Rachid, 2010. "Pricing European options with a log Student’s t-distribution: A Gosset formula," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(24), pages 5736-5748.
- Wei, Yu, 2012. "Forecasting volatility of fuel oil futures in China: GARCH-type, SV or realized volatility models?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(22), pages 5546-5556.
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