Asset Price Modeling: From Fractional to Multifractional Processes

Sergio Bianchi and Augusto Pianese
Additional contact information
Augusto Pianese: New York University

A chapter in Future Perspectives in Risk Models and Finance, 2015, pp 247-285 from Springer

Abstract: Abstract This contribution surveys the main characteristics of two stochastic processes that generalize the fractional Brownian motion: the multifractional Brownian motion and the multifractional processes with random exponent. A special emphasis will be devoted to the meaning and to the applications that they can have in finance. If fractional Brownian motion is by now very well-known and studied as a model of the price dynamics, multifractional processes are yet widely unknown in the field of quantitative finance, mainly because of their nonstationarity. Nonetheless, in spite of their complex structure, such processes deserve consideration for their capability to seize the stylized facts that most of the current models cannot account for. In addition, their functional parameter provides an insightful and parsimonious interpretation of the market mechanism, and is able to unify in a single model two opposite approaches such as the theory of efficient markets and the behavioral finance.

Keywords: Brownian Motion; Fractional Brownian Motion; Hurst Exponent; Financial Time Series; Efficient Market Hypothesis (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:spr:isochp:978-3-319-07524-2_7

Ordering information: This item can be ordered from
http://www.springer.com/9783319075242

DOI: 10.1007/978-3-319-07524-2_7

Access Statistics for this chapter

More chapters in International Series in Operations Research & Management Science from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().