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Additive versus multiplicative parameters - applications in economics and finance

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  • Helena Jasiulewicz
  • Wojciech Kordecki

Abstract

In this paper, we pay our attention to geometric parameters and their applications in economics and finance. We discuss the multiplicative models in which a geometric mean and a geometric standard deviation are more natural than arithmetic ones. We give two examples from Warsaw Stock Exchange in 1995--2009 and from a bid of 52-week treasury bills in 1992--2009 in Poland as an illustrative example. For distributions having applications in finance and insurance we give their multiplicative parameters as well as their estimations. We consider, among others, heavy-tailed distributions such as lognormal and Pareto distribution, applied to modelling of large losses.

Suggested Citation

  • Helena Jasiulewicz & Wojciech Kordecki, 2013. "Additive versus multiplicative parameters - applications in economics and finance," Papers 1306.4994, arXiv.org, revised Dec 2016.
    • Handle: RePEc:arx:papers:1306.4994
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