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Financial volatility and independent and identically distributed variables

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  • Figueiredo, Annibal
  • Gleria, Iram
  • Matsushita, Raul
  • Da Silva, Sergio

Abstract

Given that financial series are poorly described by Gaussian distributions, how can the volatility behavior of such series be explained? Here we put forward a possible explanation to add the existing ones. We focus on a class of reduced variables that are independent and identically distributed. These variables together with an extra exponential law are able to explain the volatility of the intraday Brazilian real-US dollar exchange rate for the year 2002.

Suggested Citation

  • Figueiredo, Annibal & Gleria, Iram & Matsushita, Raul & Da Silva, Sergio, 2005. "Financial volatility and independent and identically distributed variables," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 346(3), pages 484-498.
    • Handle: RePEc:eee:phsmap:v:346:y:2005:i:3:p:484-498
    DOI: 10.1016/j.physa.2004.07.043
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    5. Borak, Szymon & Härdle, Wolfgang Karl & Weron, Rafał, 2005. "Stable distributions," SFB 649 Discussion Papers 2005-008, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    6. Figueiredo, Annibal & Gleria, Iram & Matsushita, Raul & Da Silva, Sergio, 2004. "Lévy flights, autocorrelation, and slow convergence," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 337(3), pages 369-383.
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    1. Figueiredo, Annibal & Gleria, Iram & Matsushita, Raul & Da Silva, Sergio, 2006. "Characteristic function approach to the sum of stochastic variables," MPRA Paper 1984, University Library of Munich, Germany.

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