MULTIVARIATE STABLE FUTURES PRICES

B. N. Cheng, S. T. Rachev

Research output: Contribution to journalArticle

35 Scopus citations

Abstract

This paper introduces new techniques for modeling financial data under the assumption that the data belong to the domain of attraction of a multivariate stable Pareto law. We provide tail estimators for the index of stability parameter a and the corresponding spectral measure. These estimators are then applied to test the associtation of the individual components and to compute estimates of portfolio risk and the covariation of commodities. A practical example is given using DM‐dollar and JY‐dollar exchange rates data.

Original languageEnglish
Pages (from-to)133-153
Number of pages21
JournalMathematical Finance
Volume5
Issue number2
DOIs
StatePublished - Apr 1995

Keywords

  • Covariation
  • Pareto‐Lévy distribution
  • association
  • multivariate stable distribution
  • risk
  • stable portfolio

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