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Functional CLTs for subordinated Lévy models in physics, finance, and econometrics

Andreas Søjmark, Fabrice Wunderlich

arXiv 22 Dec 2023 · Mathematics — Probability

arXiv:2312.15119 · PDF · DOI · OpenAlex · Extracted main text

Abstract

We present a simple unifying treatment of a broad class of applications from statistical mechanics, econometrics, mathematical finance, and insurance mathematics, where (possibly subordinated) L\'evy noise arises as a scaling limit of some form of continuous-time random walk (CTRW). For each application, it is natural to rely on weak convergence results for stochastic integrals on Skorokhod space in Skorokhod's J1 or M1 topologies. As compared to earlier and entirely separate works, we are able to give a more streamlined account while also allowing for greater generality and providing important new insights. For each application, we first elucidate how the fundamental conclusions for J1 convergent CTRWs emerge as special cases of the same general principles, and we then illustrate how the specific settings give rise to different results for strictly M1 convergent CTRWs.

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Most heavily cited references

The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.

ReferenceIntensityMentionsSectionsMain text
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Showing the top 10 of 37 scored citations.