Economy – Quantitative Finance – Statistical Finance
Scientific paper
2011-07-06
Phys. Rev. E 84, 066110 (2011)
Economy
Quantitative Finance
Statistical Finance
7 pages, 5 figures
Scientific paper
10.1103/PhysRevE.84.066110
Financial markets provide an ideal frame for the study of crossing or first-passage time events of non-Gaussian correlated dynamics mainly because large data sets are available. Tick-by-tick data of six futures markets are herein considered resulting in fat tailed first-passage time probabilities. The scaling of the return with the standard deviation collapses the probabilities of all markets examined, and also for different time horizons, into single curves, suggesting that first-passage statistics is market independent (at least for high-frequency data). On the other hand, a very closely related quantity, the survival probability, shows, away from the center and tails of the distribution, a hyperbolic $t^{-1/2}$ decay typical of a Markovian dynamics albeit the existence of memory in markets. Modifications of the Weibull and Student distributions are good candidates for the phenomenological description of first-passage time properties under certain regimes. The scaling strategies shown may be useful for risk control and algorithmic trading.
Gutiérrez-Roig Mario
Masoliver Jaume
Perelló Josep
No associations
LandOfFree
Scaling properties and universality of first-passage time probabilities in financial markets does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.
If you have personal experience with Scaling properties and universality of first-passage time probabilities in financial markets, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Scaling properties and universality of first-passage time probabilities in financial markets will most certainly appreciate the feedback.
Profile ID: LFWR-SCP-O-678723