Tuesday February 15 2011
Scuola Normale Superiore
Scuola Normale Superiore – Pisa
In this seminar I will present joint work with D. Delpini from the University of Pavia. We afford the statistical characterization of a linear Stochastic Volatility Model featuring Inverse Gamma stationary distribution for the instantaneous volatilitiy of financial returns. We detail the derivation of the moments of the return distribution, revealing the role of the Inverse Gamma law in the emergence of fat tails, and of the relevant correlation functions. We also propose a systematic methodology for estimating the model parameters, and we describe the empirical analysis of the Standard & Poor 500 index daily returns, confirming the ability of the model to capture many of the established stylized fact as well as the scaling properties of empirical distributions over different time horizons.