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Time consistency of Levy models

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  • E. Eberlein
  • F. zkan

Abstract

Time consistency of the models used is an important ingredient to improve risk management. The empirical investigation in this article gives evidence for some models driven by Levy processes to be highly consistent. This means that they provide a good statistical fit of empirical distributions of returns not only on the timescale used for calibration but on various other timescales as well. As a result these models produce more reliable risk numbers and derivative prices.

Suggested Citation

  • E. Eberlein & F. zkan, 2003. "Time consistency of Levy models," Quantitative Finance, Taylor & Francis Journals, vol. 3(1), pages 40-50.
    • Handle: RePEc:taf:quantf:v:3:y:2003:i:1:p:40-50
    DOI: 10.1088/1469-7688/3/1/304
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    Cited by:

    1. Göncü, Ahmet & Karahan, Mehmet Oğuz & Kuzubaş, Tolga Umut, 2016. "A comparative goodness-of-fit analysis of distributions of some Lévy processes and Heston model to stock index returns," The North American Journal of Economics and Finance, Elsevier, vol. 36(C), pages 69-83.
    2. Dilip B. Madan & Wim Schoutens, 2020. "Self‐similarity in long‐horizon returns," Mathematical Finance, Wiley Blackwell, vol. 30(4), pages 1368-1391, October.
    3. Jiling Cao & Xinfeng Ruan & Shu Su & Wenjun Zhang, 2020. "Pricing VIX derivatives with infinite‐activity jumps," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(3), pages 329-354, March.

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