English

Heavy-tail driven by memory

Statistical Finance 2013-05-14 v4 Statistics Theory Statistics Theory

Abstract

We propose a stochastic process driven by memory effect with novel distributions including both exponential and leptokurtic heavy-tailed distributions. A class of distribution is analytically derived from the continuum limit of the discrete binary process with the renormalized auto-correlation and the closed form moment generating function is obtained, thus the cumulants are calculated and shown to be convergent. The other class of distributions are numerically investigated. The concoction of the two stochastic processes of the different signs of memory under regime switching mechanism does incarnate power-law decay behavior, which strongly implies that memory is the alternative origin of heavy-tail.

Keywords

Cite

@article{arxiv.1201.5690,
  title  = {Heavy-tail driven by memory},
  author = {Jongwook Kim and Gabjin Oh},
  journal= {arXiv preprint arXiv:1201.5690},
  year   = {2013}
}

Comments

This paper was withdrawn by the authors because of the change in authorship. The work is replaced by the new one with considerable improvement which is available at arXiv

R2 v1 2026-06-21T20:10:26.583Z