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arXiv · 0712.0083

Smearing Distributions and their use in Financial Markets

Petr Jizba·Hagen Kleinert
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Abstract

It is shown that superpositions of path integrals with arbitrary Hamiltonians and different scaling parameters v ("variances") obey the Chapman-Kolmogorov relation for Markovian processes if and only if the corresponding smearing distributions for v have a specific functional form. Ensuing "smearing" distributions substantially simplify the coupled system of Fokker-Planck equations for smeared and un-smeared conditional probabilities. Simple application in financial models with stochastic volatility is presented.

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BibTeXRIS

Petr Jizba, Hagen Kleinert. 2007-12-03. Smearing Distributions and their use in Financial Markets. https://doi.org/10.1142/9789812837271_0089

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