IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Dependence Calibration and Portfolio Fit with FactorBased Time Changes

Listed author(s):
  • Elisa Luciano
  • Marina Marena
  • Patrizia Semeraro

The paper explores the fit properties of a class of multivariate Lévy processes, which are characterized as time-changed correlated Brownian motions. The time-change has a common and an idiosyncratic component, to re ect the properties of trade, which it represents. The resulting process may provide Variance-Gamma, Normal-Inverse- Gaussian or Generalized-Hyperbolic margins. A non-pairwise calibration to a portfolio of ten US daily stock returns over the period 2009-2013 shows that fit of the Hyperbolic specification is very good, in terms of marginal distributions and overall correlation matrix. It succeeds in explaining the return distribution of both long-only and long- short random portfolios better than competing models do. Their tail behavior is well captured also by the Variance-Gamma specification.

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:
Download Restriction: no

Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 307.

in new window

Length: 35 pages
Date of creation: 2013
Date of revision: 2014
Handle: RePEc:cca:wpaper:307
Contact details of provider: Postal:
Via Real Collegio, 30, 10024 Moncalieri (To)

Phone: +390116705000
Fax: +390116476847
Web page:

More information through EDIRC

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.:

in new window

  1. Elisa Luciano & Wim Schoutens, 2006. "A multivariate jump-driven financial asset model," Quantitative Finance, Taylor & Francis Journals, vol. 6(5), pages 385-402.
  2. Roberto Marfè, 2012. "A generalized variance gamma process for financial applications," Quantitative Finance, Taylor & Francis Journals, vol. 12(1), pages 75-87, June.
  3. Patrizia Semeraro, 2008. "A Multivariate Variance Gamma Model For Financial Applications," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-18.
  4. Harris, Lawrence, 1986. "Cross-Security Tests of the Mixture of Distributions Hypothesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(01), pages 39-46, March.
  5. Eberlein, Ernst & Keller, Ulrich & Prause, Karsten, 1998. "New Insights into Smile, Mispricing, and Value at Risk: The Hyperbolic Model," The Journal of Business, University of Chicago Press, vol. 71(3), pages 371-405, July.
  6. Martin Wallmeier & Martin Diethelm, 2012. "Multivariate downside risk: Normal versus Variance Gamma," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 32(5), pages 431-458, 05.
  7. Elisa Luciano & Patrizia Semeraro, 2010. "A Generalized Normal Mean-Variance Mixture For Return Processes In Finance," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 415-440.
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:cca:wpaper:307. 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: (Giovanni Bert)

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.