0
$\begingroup$

Simple question of a curious person:

One can say that prices tend to rise "slowly" and drop "all of a sudden". Still, they are a geometric composition upon random returns.

As I understand, this is not a feature of a geometric brownian motion.

If so, what would be a standard price process consistent with this behavior?

Best!

|improve this question
$\endgroup$
  • 4
    $\begingroup$ Sounds like you want a jump-diffusion process. Lots of material available online $\endgroup$ – James Spencer-Lavan Oct 19 '18 at 18:17
0
$\begingroup$

The natural extension of Brownian motion that includes jump are called Levy processes

https://en.wikipedia.org/wiki/L%C3%A9vy_process

probably you want to look into those.

|improve this answer
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.