Donsker theorem for the Rosenblatt process and a binary market model

Ciprian Tudor and Soledad Torres
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Ciprian Tudor: CES, SAMOS

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Abstract: In this paper, we prove a Donsker type approximation theorem for the Rosenblatt process, which is a selfsimilar stochastic process exhibiting long range dependence. By using numerical results and simulated data, we show that this approximation performs very well. We use this result to construct a binary market model driven by this process and we show that the model admits arbitrage opportunities.

Date: 2007-03
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:math/0703085

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