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Forecasting volatility with the multifractal random walk model

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Date
2012
Link to item file
http://hal.archives-ouvertes.fr/hal-00220402/en/
Dewey
Probabilités et mathématiques appliquées
Sujet
Random measures; Gaussian processes; Prediction theory; Multifractal processes
Journal issue
Mathematical Finance
Volume
22
Number
1
Publication date
2012
Article pages
83-108
Publisher
Wiley
DOI
http://dx.doi.org/10.1111/j.1467-9965.2010.00458.x
URI
https://basepub.dauphine.fr/handle/123456789/3249
Collections
  • CEREMADE : Publications
Metadata
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Author
Duchon, Jean
Robert, Raoul
Vargas, Vincent
Type
Article accepté pour publication ou publié
Abstract (EN)
We study the problem of forecasting volatility for the multifractal random walk model. In order to avoid the ill posed problem of estimating the correlation length T of the model, we introduce a limiting object defined in a quotient space; formally, this object is an infinite range logvolatility. For this object and the non limiting object, we obtain precise prediction formulas and we apply them to the problem of forecasting volatility and pricing options with the MRW model in the absence of a reliable estimate of the average volatility and T.

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