Estimation of the Stylized Facts of a Stochastic Cascade Model
We present a time series model that integrates properties from Levy-type and multifractal models. Formally, it is a stochastic volatility model with discrete time steps, t-distributed return innovations and a stochastic cascade for the volatility process. This model reproduces very well different stylized facts which cannot be reproduced together by other classes of models. We also present an estimation procedure based on the reproduction of stylized facts. This procedure is general and can easily be adapted and/or extended to other models. It may be considered as an extension of the generalized method of moments.
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New York University, Leonard N. Stern School Finance Department Working Paper Seires
99-072, New York University, Leonard N. Stern School of Business-.
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