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    Selfsimilar Processes
    Selfsimilar Processes
    Selfsimilar Processes
    Ebook138 pages57 minutes

    Selfsimilar Processes

    By Paul Embrechts

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    About this ebook

    The modeling of stochastic dependence is fundamental for understanding random systems evolving in time. When measured through linear correlation, many of these systems exhibit a slow correlation decay--a phenomenon often referred to as long-memory or long-range dependence. An example of this is the absolute returns of equity data in finance. Selfsimilar stochastic processes (particularly fractional Brownian motion) have long been postulated as a means to model this behavior, and the concept of selfsimilarity for a stochastic process is now proving to be extraordinarily useful. Selfsimilarity translates into the equality in distribution between the process under a linear time change and the same process properly scaled in space, a simple scaling property that yields a remarkably rich theory with far-flung applications.


    After a short historical overview, this book describes the current state of knowledge about selfsimilar processes and their applications. Concepts, definitions and basic properties are emphasized, giving the reader a road map of the realm of selfsimilarity that allows for further exploration. Such topics as noncentral limit theory, long-range dependence, and operator selfsimilarity are covered alongside statistical estimation, simulation, sample path properties, and stochastic differential equations driven by selfsimilar processes. Numerous references point the reader to current applications.


    Though the text uses the mathematical language of the theory of stochastic processes, researchers and end-users from such diverse fields as mathematics, physics, biology, telecommunications, finance, econometrics, and environmental science will find it an ideal entry point for studying the already extensive theory and applications of selfsimilarity.

    LanguageEnglish
    PublisherPrinceton University Press
    Release dateJan 10, 2009
    ISBN9781400825103
    Selfsimilar Processes
    Author

    Paul Embrechts

    Paul Embrechts is Professor of Mathematics at the Swiss Federal Institute of Technology (ETHZ), Zürich, Switzerland. He is the author of numerous scientific papers on stochastic processes and their applications and the coauthor of the influential book on Modelling of Extremal Events for Insurance and Finance. Makoto Maejima is Professor of Mathematics at Keio University, Yokohama, Japan. He has published extensively on selfsimilarity and stable processes.

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      Book preview

      Selfsimilar Processes - Paul Embrechts

      Selfsimilar Processes

      PRINCETON SERIES IN APPLIED MATHEMATICS

      EDITORS

      Daubechies, I. Princeton University

      Weinan E. Princeton University

      Lenstra, J.K. Technische Universiteit Eindhoven

      Süli, E. University of Oxford

      TITLES IN THE SERIES

      Emil Simiu, Chaotic Transitions in Deterministic and Stochastic Dynamical Systems: Applications of Melnikov Processes in Engineering, Physics and Neuroscience

      Paul Embrechts and Makoto Maejima, Selfsimilar Processes

      Jiming Peng, Cornelis Roos and Tamás Terlaky, Self-Regularity: A New Paradigm for Primal-Dual Interior Point Algorithms

      Selfsimilar Processes

      Paul Embrechts and Makoto Maejima

      PRINCETON UNIVERSITY PRESS

      OXFORD, PRINCETON

      Copyright © 2002 by Princeton University Press

      Published by Princeton University Press,

      41 William Street, Princeton, New Jersey 08540

      In the United Kingdom: Princeton University Press,

      3 Market Place, Woodstock, Oxfordshire OX20 1SY

      All Rights Reserved

      Library of Congress Cataloging-in-Publication Data applied for.

      Embrechts, Paul & Maejima, Makoto

      Selfsimilar Processes/Paul Embrechts and Makoto Maejima

      p.cm.

      Includes bibliographical references and index.

      ISBN: 978-1-40082-510-3

      British Library Cataloging-in-Publication Data is available

      This book has been composed in Times and Abadi

      Printed on acid-free paper

      www.pup.princeton.edu

      Printed in the United States of America

      Contents

      Preface

      Chapter 1. Introduction

      1.1 Definition of Selfsimilarity

      1.2 Brownian Motion

      1.3 Fractional Brownian Motion

      1.4 Stable Lévy Processes

      1.5 Lamperti Transformation

      Chapter 2. Some Historical Background

      2.1 Fundamental Limit Theorem

      2.2 Fixed Points of Renormalization Groups

      2.3 Limit Theorems (I)

      Chapter 3. Selfsimilar Processes with Stationary Increments

      3.1 Simple Properties

      3.2 Long-Range Dependence (I)

      3.3 Selfsimilar Processes with Finite Variances

      3.4 Limit Theorems (II)

      3.5 Stable Processes

      3.6 Selfsimilar Processes with Infinite Variance

      3.7 Long-Range Dependence (II)

      3.8 Limit Theorems (III)

      Chapter 4. Fractional Brownian Motion

      4.1 Sample Path Properties

      4.2 Fractional Brownian Motion for H≠ 1/2 is not a Semimartingale

      4.3 Stochastic Integrals with respect to Fractional Brownian Motion

      4.4 Selected Topics on Fractional Brownian Motion

      4.4.1 Distribution of the Maximum of Fractional Brownian Motion

      4.4.2 Occupation Time of Fractional Brownian Motion

      4.4.3 Multiple Points of Trajectories of Fractional Brownian Motion

      4.4.4 Large Increments of Fractional Brownian Motion

      Chapter 5. Selfsimilar Processes with Independent Increments

      5.1 K. Sato’s Theorem

      5.2 Getoor’s Example

      5.3 Kawazu’s Example

      5.4 A Gaussian Selfsimilar Process with Independent Increments

      Chapter 6. Sample Path Properties of Selfsimilar Stable Processes with Stationary Increments

      6.1 Classification

      6.2 Local Time and Nowhere Differentiability

      Chapter 7. Simulation of Selfsimilar Processes

      7.1 Some References

      7.2 Simulation of Stochastic Processes

      7.3 Simulating Lévy Jump Processes

      7.4 Simulating Fractional Brownian Motion

      7.5 Simulating General Selfsimilar Processes

      Chapter 8. Statistical Estimation

      8.1 Heuristic Approaches

      8.1.1 The R/S-Statistic

      8.1.2 The Correlogram

      8.1.3 Least Squares Regression in the Spectral Domain

      8.2 Maximum Likelihood Methods

      8.3 Further Techniques

      Chapter 9. Extensions

      9.1 Operator Selfsimilar Processes

      9.2 Semi-Selfsimilar Processes

      References

      Preface

      First, a word about the title ‘‘Selfsimilar Processes’’. Let

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