Multiplicative Stochastic Model of the Time Interval between Trades in Financial Markets
Stock price change in financial market occurs through transactions, in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely depend on the number of transactions. We introduce the multipli...
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| Format: | Article |
| Language: | English |
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Vilnius University Press
2002-06-01
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| Series: | Nonlinear Analysis |
| Subjects: | |
| Online Access: | http://www.zurnalai.vu.lt/nonlinear-analysis/article/view/15201 |
| _version_ | 1811285197592723456 |
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| author | V. Gontis |
| author_facet | V. Gontis |
| author_sort | V. Gontis |
| collection | DOAJ |
| description | Stock price change in financial market occurs through transactions, in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely depend on the number of transactions. We introduce the multiplicative stochastic model of time interval between trades and analyze spectral density and correlations of the number of transactions. The model reproduces spectral properties of the real markets and explains the mechanism of power law distribution of trading activity. Our study provides an evidence that statistical properties of financial markets are enclosed in the statistics of the time interval between trades. Multiplicative stochastic diffusion may serve as a consistent model for this statistics. |
| first_indexed | 2024-04-13T02:40:46Z |
| format | Article |
| id | doaj.art-d2cbf37f791340878be351fa09e4d089 |
| institution | Directory Open Access Journal |
| issn | 1392-5113 2335-8963 |
| language | English |
| last_indexed | 2024-04-13T02:40:46Z |
| publishDate | 2002-06-01 |
| publisher | Vilnius University Press |
| record_format | Article |
| series | Nonlinear Analysis |
| spelling | doaj.art-d2cbf37f791340878be351fa09e4d0892022-12-22T03:06:13ZengVilnius University PressNonlinear Analysis1392-51132335-89632002-06-017110.15388/NA.2002.7.1.15201Multiplicative Stochastic Model of the Time Interval between Trades in Financial MarketsV. Gontis0Institute of Theoretical Physics and Astronomy, Lithuania Stock price change in financial market occurs through transactions, in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely depend on the number of transactions. We introduce the multiplicative stochastic model of time interval between trades and analyze spectral density and correlations of the number of transactions. The model reproduces spectral properties of the real markets and explains the mechanism of power law distribution of trading activity. Our study provides an evidence that statistical properties of financial markets are enclosed in the statistics of the time interval between trades. Multiplicative stochastic diffusion may serve as a consistent model for this statistics.http://www.zurnalai.vu.lt/nonlinear-analysis/article/view/15201statistical analysisfinancial marketsstochastic modelling |
| spellingShingle | V. Gontis Multiplicative Stochastic Model of the Time Interval between Trades in Financial Markets Nonlinear Analysis statistical analysis financial markets stochastic modelling |
| title | Multiplicative Stochastic Model of the Time Interval between Trades in Financial Markets |
| title_full | Multiplicative Stochastic Model of the Time Interval between Trades in Financial Markets |
| title_fullStr | Multiplicative Stochastic Model of the Time Interval between Trades in Financial Markets |
| title_full_unstemmed | Multiplicative Stochastic Model of the Time Interval between Trades in Financial Markets |
| title_short | Multiplicative Stochastic Model of the Time Interval between Trades in Financial Markets |
| title_sort | multiplicative stochastic model of the time interval between trades in financial markets |
| topic | statistical analysis financial markets stochastic modelling |
| url | http://www.zurnalai.vu.lt/nonlinear-analysis/article/view/15201 |
| work_keys_str_mv | AT vgontis multiplicativestochasticmodelofthetimeintervalbetweentradesinfinancialmarkets |