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A risky asset model with strong dependence through fractal activity time

Heyde, C C


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...[Show more]

CollectionsANU Research Publications
Date published: 1999
Type: Journal article
Source: Journal of Applied Probability


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