Annals of the Institute of Statistical Mathematics

, Volume 53, Issue 1, pp 113–124

Lévy-Driven Carma Processes

  • P. J. Brockwell
Article

DOI: 10.1023/A:1017972605872

Cite this article as:
Brockwell, P.J. Annals of the Institute of Statistical Mathematics (2001) 53: 113. doi:10.1023/A:1017972605872

Abstract

Properties and examples of continuous-time ARMA (CARMA) processes driven by Lévy processes are examined. By allowing Lévy processes to replace Brownian motion in the definition of a Gaussian CARMA process, we obtain a much richer class of possibly heavy-tailed continuous-time stationary processes with many potential applications in finance, where such heavy tails are frequently observed in practice. If the Lévy process has finite second moments, the correlation structure of the CARMA process is the same as that of a corresponding Gaussian CARMA process. In this paper we make use of the properties of general Lévy processes to investigate CARMA processes driven by Lévy processes {W(t)} without the restriction to finite second moments. We assume only that W (1) has finite r-th absolute moment for some strictly positive r. The processes so obtained include CARMA processes with marginal symmetric stable distributions.

Lévy processCARMA processstochastic differential equationstable process

Copyright information

© The Institute of Statistical Mathematics 2001

Authors and Affiliations

  • P. J. Brockwell
    • 1
  1. 1.Statistics DepartmentColorado State UniversityFort CollinsUSA