6533b85efe1ef96bd12c07e1

RESEARCH PRODUCT

Volatility in Financial Markets: Stochastic Models and Empirical Results

Salvatore MiccichèRosario N. MantegnaGiovanni BonannoFabrizio Lillo

subject

Statistics and ProbabilityStatistical Finance (q-fin.ST)Statistical Mechanics (cond-mat.stat-mech)Stochastic modellingEconophysicFinancial marketFOS: Physical sciencesQuantitative Finance - Statistical FinanceStatistical and Nonlinear PhysicsProbability density functionStochastic processeCondensed Matter PhysicsEmpirical probabilitySettore FIS/07 - Fisica Applicata(Beni Culturali Ambientali Biol.e Medicin)FOS: Economics and businessVolatilityLognormal modelHullEconomicsEconometricsMathematical PhysicVolatility (finance)Condensed Matter - Statistical Mechanics

description

We investigate the historical volatility of the 100 most capitalized stocks traded in US equity markets. An empirical probability density function (pdf) of volatility is obtained and compared with the theoretical predictions of a lognormal model and of the Hull and White model. The lognormal model well describes the pdf in the region of low values of volatility whereas the Hull and White model better approximates the empirical pdf for large values of volatility. Both models fails in describing the empirical pdf over a moderately large volatility range.

yearjournalcountryeditionlanguage
2002-01-01
http://arxiv.org/pdf/cond-mat/0202527