The Variation of Certain Speculative Prices

1963/01/01 by Benoit Mandelbrot, Benoît B. Mandelbrot · 35 citations
Economics, Econometrics and Finance · #Complex Systems and Time Series Analysis #Economic theories and models

paper · doi:10.1086/294632

Abstract

The purpose of this chapter is to present and test a new model of price behavior in speculative markets. The principal feature of this model is that starting from the Bachelier process as applied to InZ(t) instead of Z(t), the Gaussian distribution is replaced throughout by another family of probability laws to be referred to as stable Paretian. In a somewhat complex way, the Gaussian is a limiting case of this new family, so the new model proposed in this chapter is actually a generalization of the continuous random walk of Bachelier.

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