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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Cowles Foundation Discussion Papers
1164, Cowles Foundation for Research in Economics, Yale University.
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- Adlai Fisher & Laurent Calvet & Benoit Mandelbrot, 1997. "Multifractality of Deutschemark/US Dollar Exchange Rates," Cowles Foundation Discussion Papers 1166, Cowles Foundation for Research in Economics, Yale University.
- Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
- Ernst Eberlein & Sebastian Raible, 1999. "Term Structure Models Driven by General Lévy Processes," Mathematical Finance, Wiley Blackwell, vol. 9(1), pages 31-53.
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- Laurent Calvet & Adlai Fisher & Benoit Mandelbrot, 1997. "Large Deviations and the Distribution of Price Changes," Cowles Foundation Discussion Papers 1165, Cowles Foundation for Research in Economics, Yale University.
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