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Alternative model for asset price dynamics

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Computing and Visualization in Science

Abstract

There is a wide spectrum of models available today describing the asset price underlying. The paper presents a new model for financial asset price fluctuations in which the changes in price occur at random time moments. The basic probabilistic concepts in modelling are developed, the economic interpretation of the model is discussed, arbitrage opportunities arising within the model are excluded. We also derive the closed form formulas for moments of the price process and investigate the framework of hitting times calculation. The analysis in asymptotics shows further that the process appearing in our model converges to the Wiener process. Some estimation results, obtained by the GMM, are presented.

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Authors and Affiliations

  1. Fakultät für Wirtschafts-und Sozialwissenchaften, Helmut Schmidt Universität (Universität der Bundeswehr Hamburg), Holstenhofweg 85, 22043, Hamburg, Germany

    Julia Bondarenko

  2. Lehrstuhl für BWL, insb. Derivate und Financial Engineering, Universitätsstraße 14–16, 48143, Münster, Germany

    Nicole Branger

Authors
  1. Julia Bondarenko
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  2. Nicole Branger
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Correspondence to Julia Bondarenko.

Additional information

Communicated by G. Wittum.

The paper was presented at the Workshop on Modelling and Computation in Financial Engineering in Bad Herrenalb, Germany, 6–8 May 2003.

The research has been conducted during the author’s postdoctoral fellowship granted by German Research Council (DFG), within Graduate Program “Finance and Monetary Economics”, Faculty of Economics and Business Administration, Goethe University Frankfurt-am-Main, 2000–2002.

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Bondarenko, J., Branger, N. Alternative model for asset price dynamics. Comput. Visual Sci. 10, 211–217 (2007). https://doi.org/10.1007/s00791-007-0071-z

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  • DOI: https://doi.org/10.1007/s00791-007-0071-z

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