Forecasting volatility with the multifractal random walk model

DOI10.1111/J.1467-9965.2010.00458.XMaRDI QIDQ4906541zbMATH OpenOpenAlexFDO

Authors Jean Duchon, Raoul Robert, Vincent Vargas

Publication date 28 February 2013

Published in Mathematical Finance (Search for Journal in Brave)

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

zbMATH Keywords

Gaussian processesmultifractal processesprediction theoryrandom measures

Mathematics Subject Classification ID

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

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.

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Cites work

• Continuous cascade models for asset returns
• scientific article; zbMATH DE number 45848 (Why is no real title available?)
• scientific article; zbMATH DE number 3361573 (Why is no real title available?)
• Log-infinitely divisible multifractal processes
• Modelling financial time series using multifractal random walks

Cited in

(26)

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

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