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"A Multifractal Walk down Wall Street," by Benoit Mandelbrot. Scientific American, February 1999, pages 50-53.
Benoit Mandelbrot is concerned about the risk-reducing formulas in today's investment schemes. They are only correct under unfounded assumptions, such as the statistical independence of price changes, and they do not take into account large market shifts.
To adequately model financial prices, Mandelbrot claims that we must look beyond the classical models. Instead, the study of multifractals, which is an extension of his famous work in fractal geometry, could accurately describe the volatility inherent in pricing. In this article, Mandelbrot develops his proposed model and compares realizations of it to real data.
--- Benjamin Stein
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