Forecasting volatility with the multifractal random walk model

DOI10.1111/J.1467-9965.2010.00458.XzbMATH Open1279.60051arXiv0801.4220OpenAlexW2100754476MaRDI QIDQ4906541FDOQ4906541

Authors: Jean Duchon, Raoul Robert, Vincent Vargas 

Publication date: 28 February 2013

Published in: Mathematical Finance (Search for Journal in Brave)

Abstract: We study the problem of forecasting volatility for the multifractal random walk model. In order to avoid the ill posed problem of estimating the correlation length T of the model, we introduce a limiting object defined in a quotient space; formally, this object is an infinite range logvolatility. For this object and the non limiting object, we obtain precise prediction formulas and we apply them to the problem of forecasting volatility and pricing options with the MRW model in the absence of a reliable estimate of the average volatility and T.

Full work available at URL: https://arxiv.org/abs/0801.4220

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zbMATH Keywords

Gaussian processesrandom measuresprediction theorymultifractal processes

Mathematics Subject Classification ID

Gaussian processes (60G15) Inference from stochastic processes and prediction (62M20) Fractional processes, including fractional Brownian motion (60G22) Prediction theory (aspects of stochastic processes) (60G25) Random measures (60G57) Stochastic models in economics (91B70)

Cites Work

• Title not available (Why is that?)
• Log-infinitely divisible multifractal processes
• Modelling financial time series using multifractal random walks
• Continuous cascade models for asset returns
• Title not available (Why is that?)

Cited In (22)

• MULTIFRACTAL ANALYSIS WITH DETRENDING WEIGHTED AVERAGE ALGORITHM OF HISTORICAL VOLATILITY
• Gaussian multiplicative chaos and applications: a review
• TOWARDS A MULTIFRACTAL PARADIGM OF STOCHASTIC VOLATILITY?
• Multifractal processes: definition, properties and new examples
• Convergence of the spectrum of empirical covariance matrices for independent MRW processes
• The multiplicative chaos of \(H=0\) fractional Brownian fields
• Continuous-time skewed multifractal processes as a model for financial returns
• Investigating volatility transmission across international equity markets using multivariate fractional models
• Forecasting multifractal volatility
• Volatility is rough
• Multiplicative chaos of the Brownian loop soup
• Multifractal analysis of Gaussian multiplicative chaos and applications
• Shot noise multifractal model for turbulent pseudo-dissipation
• Lognormal \(\star\)-scale invariant random measures
• From rough to multifractal volatility: the log S-fBm model
• Modelling financial time series using multifractal random walks
• Forecasting Daily Variations of Stock Index Returns with a Multifractal Model of Realized Volatility
• Testing the type of a semi-martingale: Itō against multifractal
• Universal tail profile of Gaussian multiplicative chaos
• The conditional law of the Bacry-Muzy and Riemann-Liouville log correlated Gaussian fields and their GMC, via Gaussian Hilbert and fractional Sobolev spaces
• Gaussian multiplicative chaos for symmetric isotropic matrices
• Optimal trade execution for Gaussian signals with power-law resilience

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