Document Type

Conference Paper

Rights

Available under a Creative Commons Attribution Non-Commercial Share Alike 4.0 International Licence

Disciplines

2. ENGINEERING AND TECHNOLOGY

Publication Details

The 2012 International Conference of Financial Engineering (Submitted), London, 2012

Abstract

We consider an approach to analysing the Stochastic Volatility of a financial time series using the Generalised Kolmogorov-Feller Equation (GKFE). After reviewing the computation of the Stochastic Volatility using a phase only condition, a Green’s function solution to the GKFE equation is derived which depends upon the ‘memory function’ used to construct the GKFE. Using the Mittag-Leffler memory function, we derive an expression for the Impulse Response Function associated with a short time window of data which is then used to derive an algorithm for computing a new index using a standard moving window process. It is shown that application of this index to both a financial time series and its corresponding Stochastic Volatility provides a correlation between the start, direction and end of a trend depending on the sampling rate of the time series and the look-back window that is used.

DOI

10.21427/D7R637

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