Forecasting volatility with the multifractal random walk model

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

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 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)

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

• scientific article; zbMATH DE number 45848 (Why is no real title available?)
• scientific article; zbMATH DE number 3361573 (Why is no real title available?)
• Continuous cascade models for asset returns
• Log-infinitely divisible multifractal processes
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Cited in

(24)

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

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