Continuous-time random-walk model for financial distributions
Abstract
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 U.S. dollar deutsche mark future exchange, finding good agreement between theory and the observed data.
- Publication:
-
Physical Review E
- Pub Date:
- February 2003
- DOI:
- 10.1103/PhysRevE.67.021112
- arXiv:
- arXiv:cond-mat/0210513
- Bibcode:
- 2003PhRvE..67b1112M
- Keywords:
-
- 05.40.Jc;
- 89.65.Gh;
- 02.50.Ey;
- 05.45.Tp;
- Brownian motion;
- Economics;
- econophysics financial markets business and management;
- Stochastic processes;
- Time series analysis;
- Condensed Matter - Statistical Mechanics;
- Quantitative Finance - Statistical Finance
- E-Print:
- 14 pages, 5 figures, revtex4, submitted for publication