Engineering Commons^™

Financial Forecasting Using The Kolmogorov-Feller Equation, Jonathan Blackledge, Marc Lamphiere, Kieran Murphy, Shaun Overton

Articles

An approach to analysing a financial time series using the Kolmogorov-Feller Equation is considered, in particular, the Generalised Kolmogorov-Feller Equation (GKFE) subject to variations in the Stochastic Volatility. Using the Mittag-Leffler memory function, we derive an expression for the Impulse Response Function associated with a short time window of data which is then used to derive an algorithm for computing a new index using a standard moving window process. It is shown that application of this index to financial time series, subject to a low volatility condition, correlates with the start, direction and end of a trend depending on the …