The Modeling and Analysis of Financial Time Series

DOI10.2307/3109801MaRDI QIDQ4222460zbMATH OpenOpenAlexFDO

Authors James H. Case

Publication date 12 October 2000

Published in The American Mathematical Monthly (Search for Journal in Brave)

Full work available at URL https://doi.org/10.2307/3109801

zbMATH Keywords

Bachelier-Wiener processfinancial variableGaussian distributionput and call options

Mathematics Subject Classification ID

Economic time series analysis (91B84)

Review text

The paper has an explanatory character based on empirical evidence that introduces the prospective readers into the realm of put and call options and applicability of Bachelier-Wiener (B-W) and Gaussian processes. His remarks are generally critical. For example, concerning the Gaussian distribution he writes that it is at best a rough approximation of the observed empirical distributions because in practice they are often skewed with the skewness coefficients being positive in some areas and negative in others B-W models typically overstate the actual variance of financial variables for small \(t-t_0\). There is much evidence that B-W processes leave much of the behaviour of the S \& P 500, Dow Jones and other indices unexplained.

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