Exact probability distribution function for multifractal random walk models of stocks

Abstract

We investigate the multifractal random walk (MRW) model, popular in the modelling of stock fluctuations in the financial market. The exact probability distribution function (PDF) is derived by employing methods proposed in the derivation of correlation functions in string theory, including the analytical extension of Selberg integrals. We show that the recent results by Y. V. Fyodorov, P. Le Doussal and A. Rosso obtained with the logarithmic Random Energy Model (REM) model are sufficient to derive exact formulas for the PDF of the log returns in the MRW model.