Elliptical tempered stable distribution

Hassan A. Fallahgoul, Young S. Kim, Frank J Fabozzi

Research output: Contribution to journalArticleResearchpeer-review

8 Citations (Scopus)

Abstract

Elliptical distributions are useful for modelling multivariate data, multivariate normal and Student t distributions being two special classes. In this paper, we provide a definition for the elliptical tempered stable (ETS) distribution based on its characteristic function, which involves a unique spectral measure. This definition provides a framework for creating a connection between the infinite divisible distribution (in particular the ETS distribution) with fractional calculus. In addition, a definition for the ETS copula is discussed. A simulation study shows the accuracy of this definition, in comparison to the normal copula for measuring the dependency of data. An empirical study of stock market index returns for 20 countries shows the usefulness of the theoretical results.

Original languageEnglish
Pages (from-to)1069-1087
Number of pages19
JournalQuantitative Finance
Volume16
Issue number7
DOIs
Publication statusPublished - 2 Jul 2016
Externally publishedYes

Keywords

  • Elliptical distribution
  • Fractional calculus
  • Tempered stable distribution

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