6533b85ffe1ef96bd12c109e

RESEARCH PRODUCT

Volatility Effects on the Escape Time in Financial Market Models

Bernardo SpagnoloDavide Valenti

subject

Physics - Physics and SocietyStock market modelFOS: Physical sciencesProbability density functionPhysics and Society (physics.soc-ph)Langevin-type equationHeston modelEconophysics; Stock market model; Langevin-type equation; Heston model; Complex SystemsFOS: Economics and businessEconometricsEconomicsEngineering (miscellaneous)Statistical Finance (q-fin.ST)EconophysicsStochastic volatilityApplied MathematicsEconophysicFinancial marketQuantitative Finance - Statistical FinanceComplex SystemsSettore FIS/07 - Fisica Applicata(Beni Culturali Ambientali Biol.e Medicin)Heston modelModeling and SimulationMarket dataStock marketVolatility (finance)

description

We shortly review the statistical properties of the escape times, or hitting times, for stock price returns by using different models which describe the stock market evolution. We compare the probability function (PF) of these escape times with that obtained from real market data. Afterwards we analyze in detail the effect both of noise and different initial conditions on the escape time in a market model with stochastic volatility and a cubic nonlinearity. For this model we compare the PF of the stock price returns, the PF of the volatility and the return correlation with the same statistical characteristics obtained from real market data.

yearjournalcountryeditionlanguage
2008-01-01
http://hdl.handle.net/10447/12837