What is the general consensus for using a Cauchy distribution to model stock prices? I can't find much after researching online and wonder if it has been tried and discarded.
My motivation is to find a distribution for the stochastic process governing infinitesimally small stock price movements ΔWt. The standard process used is the Wiener process depending on a normal random variable \epsilon i.e. \Delta W_t = \epsilon \sqrt{t}. This results in the problem that resulting prices are normally distributed, but it is well known that stock prices have heavier tails than that.
In fact it seems that if \epsilon follows any finite variance distribution, it will result in normally distributed prices by the CLT.
I am therefore looking for a stable distribution to model stock prices and the Cauchy immediately came to mind.
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