Advertisement

Why is it Fat-tailed?

  • Kocho Kubota
Conference paper

Summary

When we talk about the price fluctuation, whether it is in an academy or in the actual financial market, following three factors are taken for granted.

First, the distribution of a price fluctuation obeys logarithmic normal distribution.

Second, the random variables of prices are independent.

Third, the distribution is steady and constant at all times.

We tend to neglect the fact that a normal distribution requires some important premises: both expectation and variance must be constant. Can we separate both mean value and variance as an independent parameter in the world of price fluctuation statistics? After all our experience in the financial market, we are rather skeptical about this. Real market is a very discrete and uniformless world.

We make mistakes easily on recognizing the real market phenomenon, leading to obtain result such as “We can’t see forest for trees.”

So we would like to explain the structure and the characteristic of a price in a financial market, mainly focusing on the Dollar Yen market with some concepts: quasi-Fractal dimension in ξ t-P metric space, µ 2σ 2 test and that the structure leads a Lévy Additive process.

Keywords

Financial Market Price Level Price Difference Price Fluctuation Market Trader 
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.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. 1.
    B. B. Mandelbrot, The Fractal Geometry of Nature (Freeman, San Francisco, 1999).Google Scholar
  2. 2.
    Kiyoshi Ito, Probability Theory (Iwanami-Shoten Publishers, Tokyo, 1991).Google Scholar

Copyright information

© Springer Japan 2002

Authors and Affiliations

  • Kocho Kubota
    • 1
  1. 1.Structured finance & Engineering Div.The Norinchukin bankChiyoda-Ku, TokyoJapan

Personalised recommendations