The Variation of Certain Speculative Prices

Benoît Mandelbrot

Chapter 3 in The World Scientific Handbook of Futures Markets, 2015, pp 39-78 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The purpose of this chapter is to present and test a new model of price behavior in speculative markets. The principal feature of this model is that starting from the Bachelier process as applied to InZ(t) instead of Z(t), the Gaussian distribution is replaced throughout by another family of probability laws to be referred to as stable Paretian. In a somewhat complex way, the Gaussian is a limiting case of this new family, so the new model proposed in this chapter is actually a generalization of the continuous random walk of Bachelier.

Keywords: Futures Markets; Pricing; Risk Management; Futures Trading; Stock Indexes; Interest Rates; Futures Prices; Portfolio Theory; Hedge Funds; Foreign Exchange (search for similar items in EconPapers)
Date: 2015
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Journal Article: The Variation of Certain Speculative Prices (1963)
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