Abstract:The models of stochastic subordination, or random time indexing, has been recently applied to model financial returns Xtt≥0 exhibiting some characteristic periods of constant values for instance exchange rate. In reality, sharp and large variations for X(t) do occur. These sharp and large variations are linked to information arrivals and/or represent sudden events and hence we have a model with jumps. For this purpose, by substituting the usual deterministic time t as a subordinator Ttt≥0 in a stochastic proce… Show more
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