Stochastic multiplicative processes for financial markets

Zhi Feng Huang, Sorin Solomon*

*Corresponding author for this work

Research output: Contribution to journalConference articlepeer-review

23 Scopus citations

Abstract

We study a stochastic multiplicative system composed of finite asynchronous elements to describe the wealth evolution in financial markets. We find that the wealth fluctuations or returns of this system can be described by a walk with correlated step sizes obeying truncated Lévy-like distribution, and the cross-correlation between relative updated wealths is the origin of the nontrivial properties of returns, including the power-law distribution with exponent outside the stable Lévy regime and the long-range persistence of volatility correlations.

Original languageEnglish
Pages (from-to)412-422
Number of pages11
JournalPhysica A: Statistical Mechanics and its Applications
Volume306
DOIs
StatePublished - 1 Apr 2002
Event21th IUPAP Conference on Invited Papares (STATPHYS 21) - Cancun, Mexico
Duration: 15 Jul 200121 Jul 2001

Keywords

  • Multiplicative processes
  • Power law
  • Volatility correlations

Fingerprint

Dive into the research topics of 'Stochastic multiplicative processes for financial markets'. Together they form a unique fingerprint.

Cite this