Modelling Stock Returns with Lévy Processes

Banque et Marchés, N° 66, p. 36-46, 2003

24 Pages Posted: 6 Feb 2017

See all articles by Olivier Le Courtois

Olivier Le Courtois

EM Lyon (Ecole de Management de Lyon) - Department of Economics, Finance, Control

Date Written: 2003

Abstract

Several approaches to model stock returns with Lévy Processes have been developed in the past years. Firstly, this article will review existing approaches and compare the latest ones through an analysis of the Lévy density. Secondly, this article will provide a simple but general parameterization for the Lévy density which yields a class of Lévy processes that can be used in a financial context. These processes - titled alpha-beta Lévy motions - will allow for excessive arrival rates of average size jumps, in correspondence to humped return distributions at short time scales.

Suggested Citation

Le Courtois, Olivier Arnaud, Modelling Stock Returns with Lévy Processes (2003). Banque et Marchés, N° 66, p. 36-46, 2003 . Available at SSRN: https://ssrn.com/abstract=2911873

Olivier Arnaud Le Courtois (Contact Author)

EM Lyon (Ecole de Management de Lyon) - Department of Economics, Finance, Control ( email )

23, av. Guy de Collongue
69134 Ecully Cedex
France

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