The Dynamics of Financial Markets -- Mandelbrot's multifractal cascades, and beyond

Lisa Borland, Jean-Philippe Bouchaud, Jean-Francois Muzy and Gilles Zumbach
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Lisa Borland: Evnine-Vaughan Associates, Inc.
Jean-Philippe Bouchaud: Science & Finance, Capital Fund Management
Jean-Francois Muzy: Centre de Recherche Paul Pascal, Pessac, FRANCE
Gilles Zumbach: Consulting in Financial Research

No 500061, Science & Finance (CFM) working paper archive from Science & Finance, Capital Fund Management

Abstract: This is a short review in honor of B. Mandelbrot's 80st birthday, to appear in W ilmott magazine. We discuss how multiplicative cascades and related multifractal ideas might be relevant to model the main statistical features of financial time series, in particular the intermittent, long-memory nature of the volatility. We describe in details the Bacry-Muzy-Delour multifractal random walk. We point out some inadequacies of the current models, in particular concerning time reversal symmetry, and propose an alternative family of multi-timescale models, intermediate between GARCH models and multifractal models, that seem quite promising.

JEL-codes: G10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin, nep-fmk, nep-ict and nep-rmg
Date: 2005-01
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Persistent link: http://EconPapers.repec.org/RePEc:sfi:sfiwpa:500061

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