IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Subordinated α-stable Ornstein–Uhlenbeck process as a tool for financial data description

Listed author(s):
  • Janczura, Joanna
  • Orzeł, Sebastian
  • Wyłomańska, Agnieszka

The classical financial models are based on the standard Brownian diffusion-type processes. However, in the exhibition of some real market data (like interest or exchange rates) we observe characteristic periods of constant values. Moreover, in the case of financial data, the assumption of normality is often unsatisfied. In such cases the popular Vasiček model, that is a mathematical system describing the evolution of interest rates based on the Ornstein–Uhlenbeck process, seems not to be applicable. Therefore, we propose an alternative approach based on a combination of the popular Ornstein–Uhlenbeck process with a stable distribution and subdiffusion systems that demonstrate such characteristic behavior. The probability density function of the proposed process can be described by a Fokker–Planck type equation and therefore it can be examined as an extension of the basic Ornstein–Uhlenbeck model. In this paper, we propose the parameters’ estimation method and calibrate the subordinated Vasiček model to the interest rate data.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0378437111005346
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

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

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

Volume (Year): 390 (2011)
Issue (Month): 23 ()
Pages: 4379-4387

as
in new window

Handle: RePEc:eee:phsmap:v:390:y:2011:i:23:p:4379-4387
DOI: 10.1016/j.physa.2011.07.007
Contact details of provider: Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

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.:

as
in new window


  1. Aleksander Janicki & Aleksander Weron, 1994. "Simulation and Chaotic Behavior of Alpha-stable Stochastic Processes," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook9401.
  2. Burnecki, Krzysztof & Janczura, Joanna & Weron, Rafal, 2010. "Building Loss Models," MPRA Paper 25492, University Library of Munich, Germany.
  3. Szymon Borak & Adam Misiorek & Rafał Weron, 2010. "Models for Heavy-tailed Asset Returns," SFB 649 Discussion Papers SFB649DP2010-049, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:390:y:2011:i:23:p:4379-4387. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.