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Proceedings Paper

Multi-scaling modelling in financial markets
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Paper Abstract

In the recent years, a new wave of interest spurred the involvement of complexity in finance which might provide a guideline to understand the mechanism of financial markets, and researchers with different backgrounds have made increasing contributions introducing new techniques and methodologies. In this paper, Markov-switching multifractal models (MSM) are briefly reviewed and the multi-scaling properties of different financial data are analyzed by computing the scaling exponents by means of the generalized Hurst exponent H(q). In particular we have considered H(q) for price data, absolute returns and squared returns of different empirical financial time series. We have computed H(q) for the simulated data based on the MSM models with Binomial and Lognormal distributions of the volatility components. The results demonstrate the capacity of the multifractal (MF) models to capture the stylized facts in finance, and the ability of the generalized Hurst exponents approach to detect the scaling feature of financial time series.

Paper Details

Date Published: 5 January 2008
PDF: 8 pages
Proc. SPIE 6802, Complex Systems II, 68021A (5 January 2008); doi: 10.1117/12.759585
Show Author Affiliations
Ruipeng Liu, Deakin Univ. (Australia)
The Australian National Univ. (Australia)
Univ. of Kiel (Germany)
Tomaso Aste, The Australian National Univ. (Australia)
T. Di Matteo, The Australian National Univ. (Australia)

Published in SPIE Proceedings Vol. 6802:
Complex Systems II
Derek Abbott; Tomaso Aste; Murray Batchelor; Robert Dewar; Tiziana Di Matteo; Tony Guttmann, Editor(s)

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