A note on NIG-Levy process in asset price modeling: case of Estonian companies

Teneng, Dean (2013): A note on NIG-Levy process in asset price modeling: case of Estonian companies.

Abstract

The purpose of this note is twofold. First, to correct mistakes relating to terminology and analysis of results in Teneng [7]. Second, to extend results by showing returns of companies trading on Tallinn Stock Exchange between 01 January 2008 and 01 January 2012 cannot be modeled by NIG distribution; both in cases where closing prices can and cannot be modeled by NIG distribution. Thus, the NIG-Levy process cannot be used to forecast the future prices of these assets

• Item Type: MPRA Paper
• Language: English
• Keywords: NIG, Levy process, Jumps, forecasting, goodness of fits.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C10 - General; ; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection

References

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[2] Lo, A. W., and Mackinlay, A. C.: Stock market prices do not follow random walks: Evidence from a simple speci�cation test, Review of Financial studies(1998), Vol 1, 44-66. [3] Schoutens, W.: Levy Processes in Finance, John Wiley and Sons Inc., New York, 2003.

[4] Rasmus, S., Asmussen, S., and Wiktorsson, M.: Pricing of some Exotic Options with NIG-Levy input, Centre for Analytical Finance, Aarhus University, accessed 13 December 2010. http://www.cls.dk/caf/wp/wp{166.pdf

[5] TANKOV, P.: Levy Processes in Finance and risk Management: Presented at the World Congress on Computational Finance,(March 2007) London. Accessed 15 November 2010, http://www.math.jussieu.fr/tankov/wccf paper.pdf

[6] TANKOV, P.: LevyProcesses in Finance: Inverse Problems and Dependence Modelling,(September 2004), Centre de Mathematiques Appliques, accessed 20 January 2010. http://www.math.jussieu.fr/tankov/these tankov.pdf

[7] Teneng, D.: NIG-Levy process in asset price modeling: Case of Estonian companies. In: RAMIK,J and STAVAREK, D. (eds.) Proceedings of the 30th International Conference on Mathematical Methods in Economics. Karvina: Silesian University, School of Business Administration, 2012, pg 891-896. http://mme2012.opf.slu.cz/proceedings/pdf/153 Teneng.pdf