Department of Economics and Business Economics

The mathematical operation of time-changing continuous-time stochastic processes can be regarded as a standard method for building financial models. We briefly review the theory on time-changed stochastic processes and relate them to stochastic volatility models in finance. Popular models, including time-changed Lévy processes, where the time-change process is given by a subordinator or an absolutely continuous time change, are presented. Finally, we discuss the potential and the limitations of using such processes for constructing multivariate financial models.