Ehrenfest Model with Large Jumps in Finance
Abstract
Changes (returns) in stock index prices and exchange rates for currencies are argued, based on empirical data, to obey a stable distribution with characteristic exponent α < 2 for short sampling intervals and a Gaussian distribution for long sampling intervals. In order to explain this phenomenon, an Ehrenfest model with large jumps (ELJ) is introduced to explain the empirical density function of price changes for both short and long sampling intervals.
0
Turn this paper into a full lesson
ArcXiv compiles a staged curriculum from this paper: 8-12 lessons across beginner → advanced, synthesised section guides, visuals, flashcards, a quiz, exercises, and on-demand deep dives per section. Grounded in the abstract, never invented.