Analysis of Fokker–Planck approach for foreign exchange market statistics study

In a well-known work (Phys. Rev. Lett. 84 (2000) 5224) it was shown that behaviour of returns for foreign exchange markets in different time scales can be described in terms of Fokker–Planck equation, with Kramers–Moyal coefficients being estimated from the empirical data. In the current paper the a...

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Bibliographic Details
Published in:Physica A 2004-12, Vol.344 (1), p.203-206
Main Authors: Smirnov, A.P., Shmelev, A.B., Sheinin, E.Ya
Format: Article
Language:English
Subjects:
Fokker–Planck
Foreign exchange market
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Summary:In a well-known work (Phys. Rev. Lett. 84 (2000) 5224) it was shown that behaviour of returns for foreign exchange markets in different time scales can be described in terms of Fokker–Planck equation, with Kramers–Moyal coefficients being estimated from the empirical data. In the current paper the authors provide analytical solution for stationary Fokker–Planck equation, which allows explanation of non Gaussian tails of the distribution function. It is also shown that while approximating empirical data one needs to observe some limitations for correct results obtaining.
ISSN:0378-4371
1873-2119
DOI:10.1016/j.physa.2004.06.117