Minimal model of financial stylized facts
AbstractIn this work we afford the statistical characterization of a linear Stochastic Volatility Model featuring Inverse Gamma stationary distribution for the instantaneous volatility. We detail the derivation of the moments of the return distribution, revealing the role of the Inverse Gamma law in the emergence of fat tails, and of the relevant correlation functions. We also propose a systematic methodology for estimating the parameters, and we describe the empirical analysis of the Standard & Poor 500 index daily returns, confirming the ability of the model to capture many of the established stylized fact as well as the scaling properties of empirical distributions over different time horizons.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1011.5983.
Date of creation: Nov 2010
Date of revision: Mar 2011
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
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- Giacomo Bormetti & Sofia Cazzaniga, 2011. "Multiplicative noise, fast convolution, and pricing," Papers 1107.1451, arXiv.org.
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