Dynamical Stochastic Processes of Returns in Financial Markets

Gyuchang Lim, Soo Yong Kim, Junyuan Zhou, Seong-Min Yoon and Kyungsik Kim

Papers from arXiv.org

Abstract: We study the evolution of probability distribution functions of returns, from the tick data of the Korean treasury bond (KTB) futures and the S$&$P 500 stock index, which can be described by means of the Fokker-Planck equation. We show that the Fokker-Planck equation and the Langevin equation from the estimated Kramers-Moyal coefficients are estimated directly from the empirical data. By analyzing the statistics of the returns, we present quantitatively the deterministic and random influences on financial time series for both markets, for which we can give a simple physical interpretation. We particularly focus on the diffusion coefficient that may be significantly important for the creation of a portfolio.

Date: 2005-12
References: Add references at CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/physics/0512216 Latest version (application/pdf)

Related works:
Journal Article: Dynamical stochastic processes of returns in financial markets (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:physics/0512216

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().