Modeling long-range memory trading activity by stochastic differential equations

V. Gontis and B. Kaulakys

Physica A: Statistical Mechanics and its Applications, 2007, vol. 382, issue 1, 114-120

Abstract: We propose a model of fractal point process driven by the nonlinear stochastic differential equation. The model is adjusted to the empirical data of trading activity in financial markets. This reproduces the probability distribution function and power spectral density of trading activity observed in the stock markets. We present a simple stochastic relation between the trading activity and return, which enables us to reproduce long-range memory statistical properties of volatility by numerical calculations based on the proposed fractal point process.

Keywords: Stochastic equations; Point processes; Financial markets (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:382:y:2007:i:1:p:114-120

DOI: 10.1016/j.physa.2007.02.012

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