2002/10/23 by Jaume Masoliver, Miquel Montero, George H. Weiss · 1 citation
Physics and Astronomy · Economics, Econometrics and Finance · #cond-mat.stat-mech #q-fin.ST
paper · pdf · doi:10.1103/physreve.67.021112
published as Physical Review E 67, 021112 (2003) · 14 pages, 5 figures, revtex4, submitted for publication
arxiv created 2002/10/23 · arxiv updated 2009/11/30
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.