Work

Time Scale Transformation in Bivariate Pearson Diffusions: A Shift from Light to Heavy Tails

Year: 2024

Type: article

Abstract: Heavy-tailed Pearson diffusions provide a natural alternative to well-known Ornstein–Uhlenbeck and Cox–Ingersoll–Ross processes in applications that require addressing heavy-tailed behavior. In this paper, all three heavy-tailed Pearson diffusions, having inverse gamma, Fisher–Snedecor and Student stationary distributions, are constructed via an absolutely continuous time-change process employed in a specific functional transformation of CIR or OU. Moreover, time-change rates in stochastic clocks are continuous functionals of the CIR process.

Source: Axioms

DOI: 10.3390/axioms13110765

Author: Nenad Šuvak

Institution: University of Osijek

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $2,728

Funder: Hrvatska Zaklada za Znanost