A continuous time random walk model for financial distributions

Details A continuous time random walk model for financial distributions A continuous time random walk model for financial distributions

2002-10-23

arxiv.org/abs/cond-mat/0210513v1

Physical Review E 67, 021112 (2003)

Physics

Condensed Matter

Statistical Mechanics

14 pages, 5 figures, revtex4, submitted for publication

Scientific paper

10.1103/PhysRevE.67.021112

We apply the formalism of the continuous time random walk to the study of financial data. The entire distribution of prices can be obtained once two auxiliary densities are known. These are the probability densities for the pausing time between successive jumps and the corresponding probability density for the magnitude of a jump. We have applied the formalism to data on the US dollar/Deutsche Mark future exchange, finding good agreement between theory and the observed data.

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