SIMULATION METHODS FOR LINEAR FRACTIONAL STABLE MOTION AND FARIMA USING THE FAST FOURIER TRANSFORM

Abstract

We present efficient methods for simulation, using the Fast Fourier Transform (FFT) algorithm, of two classes of processes with symmetric α-stable (SαS) distributions. Namely, (i) the linear fractional stable motion (LFSM) process and (ii) the fractional autoregressive moving average (FARIMA) time series with SαS innovations. These two types of heavy-tailed processes have infinite variances and long-range dependence and they can be used in modeling the traffic of modern computer telecommunication networks. We generate paths of the LFSM process by using Riemann-sum approximations of its SαS stochastic integral representation and paths of the FARIMA time series by truncating their moving average representation. In both the LFSM and FARIMA cases, we compute the involved sums efficiently by using the Fast Fourier Transform algorithm and provide bounds and/or estimates of the approximation error. We discuss different choices of the discretization and truncation parameters involved in our algorithms and illustrate our method. We include MATLAB implementations of these simulation algorithms and indicate how the practitioner can use them.