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The random walk model in finance: a new taxonomy

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  • Christian Walter

    (LAP - Laboratoire d’anthropologie politique – Approches interdisciplinaires et critiques des mondes contemporains, UMR 8177 - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique)

Abstract

The backbone of financial risk modeling in finance over a long time period of more than a century, the random walk hypothesis has shown substantial variations in its structure throughout its history. In this article, I revisit the history of the random walk model in finance by introducing a new way of describing what a random walk is, based on the Lévy measure in the Fourier space, a tool that has not yet been used in the history of financial thought. With this lens, we are able to understand the overview of the life of this model in finance over the entire 20th century, including the precursors of the 19th century.

Suggested Citation

  • Christian Walter, 2021. "The random walk model in finance: a new taxonomy," Working Papers hal-04578324, HAL.
    • Handle: RePEc:hal:wpaper:hal-04578324
    Note: View the original document on HAL open archive server: https://hal.science/hal-04578324
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