The Random Walk Model in Finance: A New Taxonomy

28 Pages Posted: 23 Aug 2021

See all articles by Christian Pierre Walter

Christian Pierre Walter

Ecole des Hautes Etudes en Sciences Sociales (EHESS); Institut d'éthique appliquée (IDEA); Institut des sciences juridique et philosophique (ISJPS)

Date Written: May 26, 2021

Abstract

The backbone of financial risk modeling in finance over a long time period of more than a century, the random walk hypothesis has shown substantial variations in its structure throughout its history. In this article, I revisit the history of the random walk model in finance by introducing a new way of describing what a random walk is, based on the Lévy measure in the Fourier space, a tool that has not yet been used in the history of financial thought. With this lens, we are able to understand the overview of the life of this model in finance over the entire 20th century, including the precursors of the 19th century.

Keywords: Lévy measure,Lévy process, random walk model, finance, history of financial thought

JEL Classification: B26,G00,

Suggested Citation

Walter, Christian Pierre, The Random Walk Model in Finance: A New Taxonomy (May 26, 2021). Available at SSRN: https://ssrn.com/abstract=3908441 or http://dx.doi.org/10.2139/ssrn.3908441

Christian Pierre Walter (Contact Author)

Ecole des Hautes Etudes en Sciences Sociales (EHESS) ( email )

54, boulevard Raspail
Paris, 75006
France

HOME PAGE: http://https://lap.ehess.fr/membres/christian-walter

Institut d'éthique appliquée (IDEA) ( email )

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4
Canada

Institut des sciences juridique et philosophique (ISJPS) ( email )

ISJPS
5, Place du Panthéon
Paris, 75005
France

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