Eur. Phys. J. B (2014) 87: 63
https://doi.org/10.1140/epjb/e2014-40599-1

Regular Article

Generalised diffusion model of asset price fluctuations

¹ School of Physics, Trinity College Dublin, Dublin 2, Ireland
² Capital Fund Management, 75007 Paris, France

^a e-mail: sextonmb@tcd.ie

Received: 21 June 2013
Received in final form: 10 December 2013
Published online: 12 March 2014

Abstract

We present a (semi-) analytical model of asset fluctuations using the framework of Fokker-Planck equations, together with generalised diffusion coefficients. Allowing for time dependence of the coefficients D₁ and D₂ provides a route to the characterization of the long- and short-time nature of autocorrelation functions, as is demonstrated for Dow Jones 1993–2012 financial data.