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Some Contra-Arguments for the Use of Stable Distributions in Financial Modeling

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  • Lev B. Klebanov
  • Greg Temnov
  • Ashot V. Kakosyan

Abstract

In the present paper, we discuss contra-arguments concerning the use of Pareto-Lev\'y distributions for modeling in Finance. It appears that such probability laws do not provide sufficient number of outliers observed in real data. Connection with the classical limit theorem for heavy-tailed distributions with such type of models is also questionable. The idea of alternative modeling is given.

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  • Lev B. Klebanov & Greg Temnov & Ashot V. Kakosyan, 2016. "Some Contra-Arguments for the Use of Stable Distributions in Financial Modeling," Papers 1602.00256, arXiv.org.
    • Handle: RePEc:arx:papers:1602.00256
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    1. Benoit Mandelbrot, 2015. "The Variation of Certain Speculative Prices," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 3, pages 39-78, World Scientific Publishing Co. Pte. Ltd..
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