|Title:||A stochastic cascade model for FX dynamics|
|Authors :||Breymann, Wolfgang|
|Published in :||International Journal of Theoretical and Applied Finance|
|Publisher / Ed. Institution :||World Scientific|
|License (according to publishing contract) :||Licence according to publishing contract|
|Type of review:||Peer review (Publication)|
|Subjects :||Hydrodynamic turbulence; Kolmogorov cascade; Heterogeneous market; Information flow; Volatility|
|Subject (DDC) :||332: Financial economics|
|Abstract:||A time series model for the FX dynamics is presented which takes into account structural peculiarities of the market, namely its heterogeneity and an information flow from long to short time horizons. The model emerges from an analogy between FX dynamics and hydrodynamic turbulence. The heterogeneity of the market is modeled in the form of a multiplicative cascade of time scales ranging from several minutes to a few months, analogous to the Kolmogorov cascade in turbulence. The model reproduces well the important empirical characteristics of FX rates for major currencies, as the heavy-tailed distribution of returns, their change in shape with the increasing time interval, and the persistence of volatility.|
|Departement:||School of Engineering|
|Organisational Unit:||Institute of Data Analysis and Process Design (IDP)|
|Publication type:||Article in scientific Journal|
|Appears in Collections:||Publikationen School of Engineering|
Files in This Item:
There are no files associated with this item.
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.