Additive versus multiplicative parameters - applications in economics and finance

Helena Jasiulewicz and Wojciech Kordecki

Papers from arXiv.org

Abstract: In this paper, we pay our attention to geometric parameters and their applications in economics and finance. We discuss the multiplicative models in which a geometric mean and a geometric standard deviation are more natural than arithmetic ones. We give two examples from Warsaw Stock Exchange in 1995--2009 and from a bid of 52-week treasury bills in 1992--2009 in Poland as an illustrative example. For distributions having applications in finance and insurance we give their multiplicative parameters as well as their estimations. We consider, among others, heavy-tailed distributions such as lognormal and Pareto distribution, applied to modelling of large losses.

Date: 2013-06, Revised 2016-12
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Published in Annals of Operations Research (2016) 238:299-313

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1306.4994

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