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CED Model for Asset Returns and Fractal Market Hypothesis
, 1999
"... A new general model for asset returns is studied in the framework of the Fractal Market Hypothesis (FMH). To accommodate markets with arbitrage opportunities, it concerns capital market systems in which the Conditionally Exponential Dependence (CED) property can be attached to each investor on the m ..."
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A new general model for asset returns is studied in the framework of the Fractal Market Hypothesis (FMH). To accommodate markets with arbitrage opportunities, it concerns capital market systems in which the Conditionally Exponential Dependence (CED) property can be attached to each investor on the market. Employing the limit theorem for the CED systems, the universal characteristics for the distribution of asset returns are derived. This explains the special role of the Weibull distribution in modeling of global asset returns for market with no arbitrage and the twopower laws property of the density of global returns, evident in the empirical data. Finally, the link with twoparameter Pareto distributions is established.
Origins of scaling in FX markets
, 2002
"... Abstract: Typical data sets employed by economists and financial analysts do not exceed a few hundred or thousand observations per series. However, in the last decade data sets containing tickbytick observations have become available. The studies of these data have turned up new and interesting fa ..."
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Abstract: Typical data sets employed by economists and financial analysts do not exceed a few hundred or thousand observations per series. However, in the last decade data sets containing tickbytick observations have become available. The studies of these data have turned up new and interesting facts about the pricing of assets. In this article we show that foreign exchange (FX) rate returns satisfy scaling with an exponent significantly different from that of a random walk. But what is more important, we also show that the conditionally exponential decay (CED) model can be used to solve a long standing problem in the analysis of intradaily data, i.e. it can be used to identify the mathematical structure of the distributions of FX returns corresponding to the empirical scaling laws.