Modeling of waiting times and price changes in currency exchange data

Details Modeling of waiting times and price changes in currency exchange data Modeling of waiting times and price changes in currency exchange data

2003-10-15

arxiv.org/abs/cond-mat/0310351v1

Physics

Condensed Matter

Statistical Mechanics

22 pages, 5 postscript figures, LaTeX2e using elsart.cls

Scientific paper

A theory which describes the share price evolution at financial markets as a continuous-time random walk has been generalized in order to take into account the dependence of waiting times t on price returns x. A joint probability density function (pdf) which uses the concept of a L\'{e}vy stable distribution is worked out. The theory is fitted to high-frequency US$/Japanese Yen exchange rate and low-frequency 19th century Irish stock data. The theory has been fitted both to price return and to waiting time data and the adherence to data, in terms of the chi-squared test statistic, has been improved when compared to the old theory.

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