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I have studied option pricing using Geometric Brownian Motion to generate sample paths. Because of the normal distribution, it is easy to create a covariance matrix and get correlated asset returns.

I am interested in learning more about Mandelbrot's Multi Fractal model of asset returns and it's applications. From what I can find, there exist much work about forecasting volatility using the multi fractal model.

For my purposes, I am more interested in being able to generate sample paths, i.e. produce time series data. Further I would be interested in somehow modeling correlation between assets.

Does there exist papers dealing with these problems from the viewpoint of the multi fractal model of asset returns?

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up vote 4 down vote accepted

The paper "A Multifractal Model of Asset Returns" by B. Mandelbrot, A. Fisher and L. Calvet (1997) discusses the creation of multifractal processes in Section 3.4.

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Thanks. That's great. I also found this page that I didn't find the first time for some reason: users.math.yale.edu/mandelbrot/webbooks/wb_fin.html – UmaN Jan 8 '14 at 15:09

Not acutally a paper, but there is even a book on Multifractal Models. It is, to my knowledge, the standard reference on this topic by Calvet and Fisher:

Multifractal Volatility: Theory, Forecasting, and Pricing (Academic Press Advanced Finance)

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