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Volatility Effects on the Escape Time in Financial Market Models

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Listed author(s):
  • Bernardo Spagnolo
  • Davide Valenti
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    Abstract

    We shortly review the statistical properties of the escape times, or hitting times, for stock price returns by using different models which describe the stock market evolution. We compare the probability function (PF) of these escape times with that obtained from real market data. Afterwards we analyze in detail the effect both of noise and different initial conditions on the escape time in a market model with stochastic volatility and a cubic nonlinearity. For this model we compare the PF of the stock price returns, the PF of the volatility and the return correlation with the same statistical characteristics obtained from real market data.

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    File URL: http://arxiv.org/pdf/0810.1625
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    Paper provided by arXiv.org in its series Papers with number 0810.1625.

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    Date of creation: Oct 2008
    Publication status: Published in Intern. Journ. of Bifurcation and Chaos, Vol. 18, No. 9, 2775 - 2786 (2008)
    Handle: RePEc:arx:papers:0810.1625
    Contact details of provider: Web page: http://arxiv.org/

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