A contribution to the systematics of stochastic volatility models

František Slanina

Physica A: Statistical Mechanics and its Applications, 2010, vol. 389, issue 16, 3230-3239

Abstract: We systematically compare several classes of stochastic volatility models of stock market fluctuations. We show that the long-time return distribution is either Gaussian or develops a power-law tail, while the short-time return distribution has generically a stretched-exponential form, but can also assume an algebraic decay, in the family of models which we call “GARCH” type. The intermediate regime is found in the exponential Ornstein–Uhlenbeck process. We also calculate the decay of the autocorrelation function of volatility.

Keywords: Fluctuations; Econophysics; Stochastic differential equations (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:389:y:2010:i:16:p:3230-3239

DOI: 10.1016/j.physa.2010.03.044

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