Dependence Modelling Of Financial Data using Genenalised Hyperbolic Distribution

Abstract

Generalised Hyberbolic Distributions (GHDs) are very signi…cant in modeling to model returns from …nancial market variables such as exchange rate, equity prices, and interest rate measured over short time intervals, i.e. daily or weekly. These returns are chacterized by non-normality. The empirical distribution of such returns is more peaked and has fatter tails than the normal distribution, which implies that changes in return occur with a higher frequency than under normality. In addition it is often skewed towards the left tail and has a kurtosis greater than 3. The GHD is a promising distribution for such returns. Its a heavy tailed distribution and thus has kurtosis greater than 3 (leptokurtic). GHD embraces many special cases and limiting distributions. Some examples are the hyperbolic, the Normal Inverse Gaussian(NIG), the (skew) Student’s t, Variance Gamma and the Normal itself.