Continuous time analysis of fleeting discrete price moves

Neil Shephard () and Justin J. Yang

Papers from arXiv.org

Abstract: This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically tractable and directly formulated in terms of the calendar time and price impact curve. The resulting c\`{a}dl\`{a}g price process is a piecewise constant semimartingale with finite activity, finite variation and no Brownian motion component. We use moment-based estimations to fit four high frequency futures data sets and demonstrate the descriptive power of our proposed model. This model is able to describe the observed dynamics of price changes over three different orders of magnitude of time intervals.

Date: 2014-10, Revised 2015-01
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Continuous Time Analysis of Fleeting Discrete Price Moves (2017)
Working Paper: Continuous time analysis of fleeting discrete price moves
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1410.7317

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