Generalised diffusion model of asset price fluctuations

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 D 1 and D 2 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.