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Author: Cheng, Xiaobo; Liu, Xuemei; Xie, Huizhang; Liu, Lianggang; Li, Zhibing
Title: Dynamics analysis of the disturbance of the external noise to stochastic model of the volatility
Journal Name: 澳門科技大學學報
Pub. Info: Dec. 2008, Vol.2, No.2, pp. 23-27
Keyword: Econophysics；Volatility；Stochastic process；Fokker-Planck equation
Abstract: Abstract : Volatility of financial time series is the key variable in the model of financial market. In this paper, we study the dynamic of the model with the property known as mean-reverting, specially for the Hull-White stochastic model. We consider the model of volatility is not only determined by the noise of system, but also by the exogenous fluctuation. So there are two noises in our model, and the noises are correlated. We obtain the steady probability density functions (PDF) under the different strength of the noises and the different correlation parameters. We show that the system noises have the effects on the maximum of the steady probability density functions and the tail. But the parameters of correlation have small effect on the tails. Paragraph Headings: 1. Introduction 2. Model of volatility 3. Steady state analysis of the model 4. Result and analysis of the model 5. Conclusion