If the historical average annual real interest rate is m 0, and if the world is stationary, should consumption in the distant future be discounted at the rate of m per year? Suppose the annual real interest rate r(t) reverts to m according to the Ornstein Uhlenbeck (OU) continuous time process...

For environmental problems such as global warming future costs must be balanced against present costs. This is traditionally done using an exponential function with a constant discount rate, which reduces the present value of future costs. The result is highly sensitive to the choice of discount...

We study financial distributions within the framework of the continuous time random walk (CTRW). We review earlier approaches and present new results related to overnight effects as well as the generalization of the formalism which embodies a non-Markovian formulation of the CTRW aimed to...

An analysis based on the assumption that tick-by-tick data is linear may lead to incorrect conclusions if the underlying process is multiplicative. We compare data analysis done with return and stock differences and study the limits within which the two approaches are equivalent. Illustrative...

The present work briefly summarizes the results obtained in Palatella et al. Eur. Phys. J. B 38 (2004) 671 using the Diffusion Entropy technique and adds some new results regarding the Dow Jones Index time series. We show that time distances between peaks of volatility or activity are...

We study theoretical and empirical aspects of the mean exit time of financial time series. The theoretical modeling is done within the framework of continuous time random walk. We empirically verify that the mean exit time follows a quadratic scaling law and it has associated a pre-factor which...

We study financial distributions within the framework of the continuous time random walk (CTRW). An earlier approach is modified to account for the possibility of obtaining the distribution of daily or longer-time prices, in addition to the existing model for intraday prices. We thus treat both...

For environmental problems such as global warming future costs must be balanced against present costs. This is traditionally done using an exponential function with a constant discount rate, which reduces the present value of future costs. The result is highly sensitive to the choice of discount...

We study the effect of heavy tails and correlations on the price of the one of the simplest financial derivative: the European call option. We see that both effects have opposite and nontrivial consequences on the price of the derivatives.