Fat and skew : can NIG cure? : on the prospects of using the normal inverse Gaussian distribution in finance

Abstract

This paper explores the possibility of using the Normal Inverse Gaussian (NIG) distribution introduced by Barndorff-Nielsen (1997) in various problem areas in finance where distributions often are found to be non-normal due to skewness and fat tails. More specificly we discuss problems of risk analysis and portfolio choice in a NIG context. We also briefly look into some aspects of NIG-modeling and estimation, but numerics and empirics will be pursued elsewhere.