Probability of Large Movements in Financial Markets
Statistical Finance
2009-09-06 v2
Abstract
Based on empirical financial time-series, we show that the "silence-breaking" probability follows a super-universal power law: the probability of observing a large movement is inversely proportional to the length of the on-going low-variability period. Such a scaling law has been previously predicted theoretically [R. Kitt, J. Kalda, Physica A 353 (2005) 480], assuming that the length-distribution of the low-variability periods follows a multiscaling power law.
Cite
@article{arxiv.0812.4455,
title = {Probability of Large Movements in Financial Markets},
author = {Robert Kitt and Maksim Sakki and Jaan Kalda},
journal= {arXiv preprint arXiv:0812.4455},
year = {2009}
}
Comments
8 pages, 5 figures