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Arbitrary truncated Levy flight: Asymmetrical truncation and high-order correlations

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  • Vinogradov, Dmitry V.

Abstract

The generalized correlation approach, which has been successfully used in statistical radio physics to describe non-Gaussian random processes, is proposed to describe stochastic financial processes. The generalized correlation approach has been used to describe a non-Gaussian random walk with independent, identically distributed increments in the general case, and high-order correlations have been investigated. The cumulants of an asymmetrically truncated Levy distribution have been found. The behaviors of asymmetrically truncated Levy flight, as a particular case of a random walk, are considered. It is shown that, in the Levy regime, high-order correlations between values of asymmetrically truncated Levy flight exist. The source of high-order correlations is the non-Gaussianity of the increments: the increment skewness generates threefold correlation, and the increment kurtosis generates fourfold correlation.

Suggested Citation

  • Vinogradov, Dmitry V., 2012. "Arbitrary truncated Levy flight: Asymmetrical truncation and high-order correlations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(22), pages 5584-5597.
    • Handle: RePEc:eee:phsmap:v:391:y:2012:i:22:p:5584-5597
    DOI: 10.1016/j.physa.2012.06.022
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    References listed on IDEAS

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