Elements for a theory of financial risks

J.-Ph Bouchaud

Physica A: Statistical Mechanics and its Applications, 2000, vol. 285, issue 1, 18-28

Abstract: Estimating and controlling large risks has become one of the main concerns of financial institutions. This requires the development of adequate statistical models and theoretical tools (which go beyond the traditional theories based on Gaussian statistics), and their practical implementation. Here we describe two interrelated aspects of this program: we first give a brief survey of the peculiar statistical properties of the empirical price fluctuations. We then review how an option pricing theory consistent with these statistical features can be constructed, and compared with real market prices for options.

Keywords: Financial analysis; Scaling; Power-law correlations (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:285:y:2000:i:1:p:18-28

DOI: 10.1016/S0378-4371(00)00269-7

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