Mixed Tempered Stable Distribution (Preprint Version)
Rroji, E., Mercuri, L. Mixed tempered stable distribution (2014) Quantitative Finance, 11 p., Forthcoming
18 Pages Posted: 13 Oct 2013 Last revised: 14 Nov 2014
Date Written: October 11, 2013
In this paper we introduce a new parametric distribution, the Mixed Tempered Stable. We show that, by choosing appropriately the value of the distribution parameters, it is possible to obtain some well-known distributions as special cases. The better fit to market returns and to statistical factors, obtained performing the Independent Component Analysis, is due to its flexibility. The results are useful in risk management since factor modeling can be used for portfolio allocation and risk attribution.
Keywords: Independent Component Analysis; Tempered Stable distribution; Mixture Models; Economic Factors; Statistical Factors
JEL Classification: C13; C51; G12
Suggested Citation: Suggested Citation