Extreme values and fat tails of multifractal fluctuations
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Publication:2903701
DOI10.1103/PHYSREVE.73.066114zbMATH Open1244.82026arXivcond-mat/0509357WikidataQ51935400 ScholiaQ51935400MaRDI QIDQ2903701FDOQ2903701
Authors: A. Kozhemyak, Jean-François Muzy, Emmanuel Bacry 
Publication date: 12 August 2012
Published in: Physical Review E. Third Series (Search for Journal in Brave)
Abstract: In this paper we discuss the problem of the estimation of extreme event occurrence probability for data drawn from some multifractal process. We also study the heavy (power-law) tail behavior of probability density function associated with such data. We show that because of strong correlations, standard extreme value approach is not valid and classical tail exponent estimators should be interpreted cautiously. Extreme statistics associated with multifractal random processes turn out to be characterized by non self-averaging properties. Our considerations rely upon some analogy between random multiplicative cascades and the physics of disordered systems and also on recent mathematical results about the so-called multifractal formalism. Applied to financial time series, our findings allow us to propose an unified framemork that accounts for the observed multiscaling properties of return fluctuations, the volatility clustering phenomenon and the observed ``inverse cubic law of the return pdf tails.
Full work available at URL: https://arxiv.org/abs/cond-mat/0509357
Recommendations
Statistics of extreme values; tail inference (62G32) Statistical methods; risk measures (91G70) Stochastic methods applied to problems in equilibrium statistical mechanics (82B31)
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Cited In (15)
- Log-normal continuous cascade model of asset returns: aggregation properties and estimation
- Multifractal analysis in a mixed asymptotic framework
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