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Scaling in Financial Data and in Physics

  • Johannes Voit
Chapter
  • 571 Downloads
Part of the Texts and Monographs in Physics book series (TMP)

Abstract

The Black—Scholes equation for option prices is based on a number of hypotheses and assumptions. Subsequent price changes were assumed to be statistically independent, and their probability distribution was assumed to be the normal distribution. Moreover, the risk-free interest rate r and the volatility σ were assumed constant (in the simplest version of the theory). In this chapter, we will examine financial data in the light of these assumptions, develop more general stochastic processes, and emphasize the parallels between financial data and physics beyond the realm of Brownian motion.

Keywords

Stochastic Volatility Hurst Exponent Random Matrix Theory Geometric Brownian Motion Stochastic Volatility Model 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2003

Authors and Affiliations

  • Johannes Voit
    • 1
  1. 1.Deutscher Sparkassen- und GiroverbandBonnGermany

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