Berlin 2005 – scientific programme

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DY: Dynamik und Statistische Physik

DY 43: Einstein Symposium Brownian Motion, Diffusion and Beyond (SYBM) – Contributed Talks I

DY 43.1: Talk

Tuesday, March 8, 2005, 14:30–14:45, TU H2032

Ornstein-Uhlenbeck Process in Physics and Finance — •Ralf Remer and Reinhard Mahnke — Institute of Physics, Rostock University, D–18051 Rostock, Germany

We regard the Ornstein-Uhlenbeck process in Physics starting with the historic paper by Uhlenbeck and Ornstein [1] and its solution by Chandrasekhar [2]. We also demonstrate another way for solving the system of equations and visualize the solution.

Then we apply the Ornstein-Uhlenbeck process to the field of Finance by using appropriate transformations. We compare the received system of equations with empirical high frequency data of German stock market by calculating the probability density distributions of price changes for short time lags.

[1] G. E. Uhlenbeck and L. S. Ornstein 1930 On the theory of the Brownian motion Physical Review 36 823–841

[2] S. Chandrasekhar 1943 Stochastic Problems in Physics and Astronomy Reviews of Modern Physics 15 1–89