Modeling Financial Security Returns Using Levy Processes

Modeling Financial Security Returns Using Lévy Processes

Lévy processes can capture the behaviors of return innovations on a full range of financial securities. Applying stochastic time changes to the Lévy processes randomizes the clock on which the processes run, thus generating stochastic volatilities and stochastic higher return moments. Therefore, with appropriate choices of Lévy processes and stochastic time changes, we can capture the return dy...

Using Lévy processes to model security returns

Financial Modeling and Option Theory with the Truncated Levy Process

In recent studies the truncated Levy process (TLP) has been shown to be very promising for the modeling of financial dynamics. In contrast to the Levy process, the TLP has finite moments and can account for both the previously observed excess kurtosis at short timescales, along with the slow convergence to Gaussian at longer timescales. In this paper I further test the truncated Levy paradigm u...

Appendices for: Search for Financial Returns and Social Security Privatization

Financial modeling with Lévy processes