ABSTRACT
As mentioned in the introduction, one of the principal motivations for departing from Gaussian models in finance has been to take into account some of the observed empirical properties of asset returns which disagree with these models. Lévy processes entered financial econometrics in 1963 when Mandelbrot [278] proposed -stable Lévy processes as models for cotton prices. Since then a variety of models based on Lévy processes have been proposed as models for asset prices and tested on empirical data. In this chapter we discuss some of these models and examine how they fare in reproducing stylized properties of asset prices.
