Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099559 | Journal of Economic Dynamics and Control | 2008 | 44 Pages |
Abstract
In this paper, we make a short overview of continuous cascade models recently introduced to model asset return fluctuations. We show that these models account in a very parcimonious manner for most of 'stylized facts' of financial time-series. We review in more details the simplest continuous cascade namely the log-normal multifractal random walk (MRW). It can simply be considered as a stochastic volatility model where the (log-) volatility memory has a peculiar 'logarithmic' shape. This model possesses some appealing stability properties with respect to time aggregation. We describe how one can estimate it using a GMM method and we present some applications to volatility and (VaR) Value at Risk forecasting.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
E. Bacry, A. Kozhemyak, Jean-François Muzy,