An approach to stochastic differential equations for long-term forecasting in the presence of $\alpha$-stable noise: an application to gold prices

Year 2024, , 165 - 192, 30.06.2024

Bakary D. Coulibaly , Chaibi Ghizlane , Mohammed El Khomssi

https://doi.org/10.53391/mmnsa.1416148

Abstract

This article introduces a novel approach to forecasting gold prices over an extended period by leveraging a sophisticated stochastic process. Departing from traditional models, our proposed framework accommodates the non-Gaussian and non-homogeneous nature of gold market dynamics. Rooted in the $\alpha$-stable distribution, our model captures time-dependent characteristics and exhibits flexibility in handling the distinctive features observed in real gold prices. Building upon prior research, we present a comprehensive methodology for estimating time-dependent parameters and validate its efficacy through simulations. The results affirm the universality of our stochastic model, showcasing its applicability for accurate and robust long-term predictions in gold prices.

Keywords

Stochastic differential equation, modeling $\alpha$-stable distribution, parameters estimation, forecasting, gold prices, long-term prediction

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