Journal of Applied Probability
- J. Appl. Probab.
- Volume 36, Number 4 (1999), 1234-1239.
A risky asset model with strong dependence through fractal activity time
The geometric Brownian motion (Black-Scholes) model for the price of a risky asset stipulates that the log returns are i.i.d. Gaussian. However, typical log returns data shows a leptokurtic distribution (much higher peak and heavier tails than the Gaussian) as well as evidence of strong dependence. In this paper a subordinator model based on fractal activity time is proposed which simply explains these observed features in the data, and whose scaling properties check out well on various data sets.
J. Appl. Probab. Volume 36, Number 4 (1999), 1234-1239.
First available in Project Euclid: 18 September 2002
Permanent link to this document
Digital Object Identifier
Mathematical Reviews number (MathSciNet)
Zentralblatt MATH identifier
Secondary: 62M10: Time series, auto-correlation, regression, etc. [See also 91B84] 60G18: Self-similar processes
Heyde, C. C. A risky asset model with strong dependence through fractal activity time. J. Appl. Probab. 36 (1999), no. 4, 1234--1239. doi:10.1239/jap/1032374769. http://projecteuclid.org/euclid.jap/1032374769.