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Multi-modal tempered stable distributions and prosses with applications to finance

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  • Ahmad Arefi
  • Reza Pourtaheri

Abstract

The assumption of underlying return distribution plays an important role in asset pricing models. While the return distribution used in the traditional theories of asset pricing is the unimodal distribution, numerous studies which have investigated the empirical behavior of asset returns in financial markets use multi-modal distribution. We introduce a new parsimonious multi-modal distribution, referred to as the multi-modal tempered stable (MMTS) distribution. In this article we also generate the exponential Lévy market models and derive the value-at-risk (VaR) induced from them. To demonstrate the advantages, we will present the results of the parameter estimation and the VaRs for financial data.

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  • Ahmad Arefi & Reza Pourtaheri, 2020. "Multi-modal tempered stable distributions and prosses with applications to finance," Communications in Statistics - Theory and Methods, Taylor & Francis Journals, vol. 49(17), pages 4133-4149, September.
    • Handle: RePEc:taf:lstaxx:v:49:y:2020:i:17:p:4133-4149
    DOI: 10.1080/03610926.2019.1594304
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