TY - GEN
T1 - Tempered stable distributions and processes in finance
AU - Bianchi, Michele Leonardo
AU - Rachev, Svetlozar T.
AU - Kim, Young Shin
AU - Fabozzi, Frank J.
PY - 2010
Y1 - 2010
N2 - Most of the important models in finance rest on the assumption that randomness is explained through a normal random variable. However there is ample empirical evidence against the normality assumption, since stock returns are heavy-tailed, leptokurtic and skewed. Partly in response to those empirical inconsistencies relative to the properties of the normal distribution, a suitable alternative distribution is the family of tempered stable distributions. In general, the use of infinitely divisible distributions is obstructed the difficulty of calibrating and simulating them. In this paper, we address some numerical issues resulting from tempered stable modelling, with a view toward the density approximation and simulation.
AB - Most of the important models in finance rest on the assumption that randomness is explained through a normal random variable. However there is ample empirical evidence against the normality assumption, since stock returns are heavy-tailed, leptokurtic and skewed. Partly in response to those empirical inconsistencies relative to the properties of the normal distribution, a suitable alternative distribution is the family of tempered stable distributions. In general, the use of infinitely divisible distributions is obstructed the difficulty of calibrating and simulating them. In this paper, we address some numerical issues resulting from tempered stable modelling, with a view toward the density approximation and simulation.
KW - Monte Carlo
KW - Stable distribution
KW - Tempered stable distributions
UR - http://www.scopus.com/inward/record.url?scp=84900198154&partnerID=8YFLogxK
U2 - 10.1007/978-88-470-1481-7_4
DO - 10.1007/978-88-470-1481-7_4
M3 - Conference contribution
AN - SCOPUS:84900198154
SN - 9788847014800
T3 - Mathematical and Statistical Methods for Actuarial Sciences and Finance
SP - 33
EP - 42
BT - Mathematical and Statistical Methods for Actuarial Sciences and Finance
PB - Kluwer Academic Publishers
Y2 - 26 March 2008 through 28 March 2008
ER -