Presents a powerful new technique for forecasting volatility
Preface
Chapter 1 Introduction
Chapter 2 Background
Chapter 3 The Multifractal Volatility Model: The MMAR
Chapter 4 The Marko-Switching Multifractal (MSM) in Discrete
Time
Chapter 5. Multivariate MSM
Chapter 6 The Marko-Switching Multifractal in Continuous Time
Chapter 7 Multifrequency News and Stock Returns
Chapter 8 Multifrequency Jump Diffusions
Chapter 9 Conclusion
Appendices
By Laurent E. Calvet and Adlai J. Fisher
Advance Praise for Multifractal Volitility “I thoroughly enjoyed
reading the book and highly recommend it. The authors masterfully
present their work on the Markov-Switching Multifractal model and
its implications for Asset Pricing. This is a wonderful
contribution to the field of Financial Economics. --Ravi Bansal,
J.B. Fuqua Professor of Finance, Duke University Durham, NC
“I have always been intrigued by the multi-fractal approach to
volatility modeling, forecasting and pricing pioneered by Calvet
and Fisher. This book does a wonderful job in gathering together
all of the fundamental ideas and results in a coherent framework,
and I highly recommend it to anybody interested in learning more
about these novel techniques and how they compare to the more
traditional GARCH and stochastic volatility based modeling
procedures. --Tim Bollerslev, Juanita and Clifton Kreps Professor
of Economics, Duke University, NC
“This starkly original work defines a key part of the research
frontier, developing a ‘multifractal’ perspective on volatility
that unifies regime-switching and long memory, in discrete and
continuous time, univariate and multivariate. Simultaneously and
astonishingly, it is of immediate practical relevance for asset
management, asset pricing and risk management. This book is
required reading, for academics and practitioners alike. --Francis
X. Diebold, J.M. Cohen Professor of Economics, University of
Pennsylvania
"Calvet and Fisher have fashioned the definitive treatment of
multi-fractal models of return volatility. Since Mandelbrot first
challenged the standard paradigm, evidence supporting the
parsiomony and flexibility of the multifractal approach has
accumulated. Calvet and Fisher are uniquely positioned to finally
unify this progress, much of which is based on their own research.
The result is masterful and convincing, particularly for capturing
return risk over multiple time horizons. I highly recommend their
book." --Darrell Duffie, Dean Witter Distinguished Professor of
Finance, Stanford University, CA
“This book offers a unified treatment of multifractal volatility, a
remarkable approach developed by the authors in a series of earlier
papers. The idea is to capture in a single, coherent framework the
set of observed features of financial data, whether seen as “jumps
in continuous-time models, “fat tails in data discretely sampled
over short intervals, different characterizations of volatility
persistence over intermediate and long horizons, and nonlinearities
and skewness in the conditional distributions. The underlying
framework is a Markov-switching model with a very large number of
different regimes, with the nature of different regimes summarized
by a much smaller set of parameters. The book provides an excellent
illustration of just how successful this flexible yet parsimonious
approach can be in terms of describing a wide variety of the
characteristics of financial time series. --James Hamilton,
Professor of Economics, University of California, San Diego
“Calvet and Fisher provide a valuable and thorough development of a
novel class of models of financial market volatility. The methods
and models exposited so nicely in their book should be part of the
toolkit of researchers interested in understanding and
characterizing the stochastic nature of volatility fluctuations.
Their book is simultaneously accessible and complete. It shows how
to use these models in practice, and it provides a rigorous
foundation for their application. --Lars Hansen, Livingston
Distinguished Service Professor, University of Chicago, IL
“Volatility is a central concern of modern financial econometrics,
challenging econometricians to build plausible models and practical
methods of inference. Calvet and Fisher draw together the
ingredients of a promising new research agenda, integrating a
decade of work on multifractal modeling into a masterful overview
of the field of volatility, demonstrating the advantages of Markov
switching multifractals in aggregating components of differing
persistence and showing us how rare events need not be studied in
isolation as curiosa. A compelling read for financial theorists and
practitioners. --Peter C. B. Philips, Sterling Professor of
Economics & Statistics, Yale University, CT
“To accommodate the high persistence and variability of volatility
in financial time series, Calvet and Fisher developed the class of
Markov-Switching Multifractal models. This book, which summarizes
ten years of their research, is of great interest to researchers in
asset pricing and essential reading for practitioners working on
risk management or volatility forecasting. --Jose Scheinkman,
Theodore Wells '29 Professor of Economics, Princeton University, NJ
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