Modeling of waiting times and price changes in currency exchange data
arXiv:cond-mat/0310351 · doi:10.1016/j.physa.2004.06.162
Abstract
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 Lévy 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.
22 pages, 5 postscript figures, LaTeX2e using elsart.cls