IDEAS home Printed from https://ideas.repec.org/p/arx/papers/0807.4163.html
   My bibliography  Save this paper

The Ups and Downs of Modeling Financial Time Series with Wiener Process Mixtures

Author

Listed:
  • Damien Challet
  • Pier Paolo Peirano

Abstract

Starting from inhomogeneous time scaling and linear decorrelation between successive price returns, Baldovin and Stella recently proposed a way to build a model describing the time evolution of a financial index. We first make it fully explicit by using Student distributions instead of power law-truncated L\'evy distributions; we also show that the analytic tractability of the model extends to the larger class of symmetric generalized hyperbolic distributions and provide a full computation of their multivariate characteristic functions; more generally, the stochastic processes arising in this framework are representable as mixtures of Wiener processes. The Baldovin and Stella model, while mimicking well volatility relaxation phenomena such as the Omori law, fails to reproduce other stylized facts such as the leverage effect or some time reversal asymmetries. We discuss how to modify the dynamics of this process in order to reproduce real data more accurately.

Suggested Citation

  • Damien Challet & Pier Paolo Peirano, 2008. "The Ups and Downs of Modeling Financial Time Series with Wiener Process Mixtures," Papers 0807.4163, arXiv.org, revised Jul 2009.
  • Handle: RePEc:arx:papers:0807.4163
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/0807.4163
    File Function: Latest version
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fulvio Baldovin & Francesco Camana & Michele Caraglio & Attilio L. Stella & Marco Zamparo, 2012. "Aftershock prediction for high-frequency financial markets' dynamics," Papers 1203.5893, arXiv.org, revised Jul 2012.

    More about this item

    Statistics

    Access and download statistics

    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:arx:papers:0807.4163. 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: (arXiv administrators). General contact details of provider: http://arxiv.org/ .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.