IDEAS home Printed from https://ideas.repec.org/a/eee/phsmap/v299y2001i1p273-278.html
   My bibliography  Save this article

Modeling the BUX index by a novel stochastic differential equation

Author

Listed:
  • Alács, Péter
  • Jánosi, Imre M.

Abstract

We present a new modeling approach for the fluctuations of the Budapest Stock Exchange index (BUX). The starting point is a statistical analysis of high resolution (5s) data involving the first and second time-derivative of index values (index “velocities” and “accelerations”). Based on the results, we propose a simple stochastic differential equation with two noise terms, which explains the observed features but preserves linearity. The solution of the model based on this equation is a Lévy distribution. By introducing an additional (damping) term in the original equation, the stationary solution arises as a Lévy function with an exponential cut-off. A special characteristic of the 5s BUX time series is the frequent presence of silent periods without index changes. The proposed equation can model also this feature by interpreting one of the noise terms as an intermittent Wiener process.

Suggested Citation

  • Alács, Péter & Jánosi, Imre M., 2001. "Modeling the BUX index by a novel stochastic differential equation," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 273-278.
    • Handle: RePEc:eee:phsmap:v:299:y:2001:i:1:p:273-278
    DOI: 10.1016/S0378-4371(01)00306-5
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378437101003065
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000
    File URL: https://libkey.io/10.1016/S0378-4371(01)00306-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:299:y:2001:i:1:p:273-278. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.