Volatility in financial markets: Stochastic models and empirical results

DOI10.1016/S0378-4371(02)01187-1MaRDI QIDQ1850396zbMATH OpenOpenAlexFDO

Authors S. Miccichè, Giovanni Bonanno, Fabrizio Lillo, Rosario Nunzio Mantegna

Publication date 3 December 2002

Published in Physica A (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/cond-mat/0202527

zbMATH Keywords

probability density functionlognormal modelHull and White model

Mathematics Subject Classification ID

Auctions, bargaining, bidding and selling, and other market models (91B26) Stochastic models in economics (91B70)

Abstract: 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.

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Cites work

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