ABSTRACT
Our basicmodel of analysis for the investment returns and foreign exchange rates is again the Fractional Brownian Motion (FBM) presented earlier in Chapter 4. In that chapter we discussed the analysis of stationary and of slowly varying nonstationary financial time series. In this chapterwe discuss the analysis of financial time series that contain numerous transient, nonstationary characteristics, such as drifts, trends, discontinuities in higher derivatives of the series, the beginnings and ends of particular events, as well as the self-similarity and scaling exhibited by the FBM.
