Related papers: Activity spectrum from waiting-time distribution
Regularizing a linear ill-posed operator equation can be achieved by manipulating the spectrum of the operator's pseudo-inverse. Tikhonov regularization and spectral cutoff are well-known techniques within this category. This paper…
We present an empirical study of the subordination hypothesis for a stochastic time series of a stock price. The fluctuating rate of trading is identified with the stochastic variance of the stock price, as in the continuous-time random…
We briefly review our recent studies on stochastic processes modelling internet on-line trading. We present a way to evaluate the average waiting time between the observation of the price in financial markets and the next price change,…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…
Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between…
We analyze tick data of yen-dollar exchange with a focus on its up and down movement. We show that there exists a rather particular conditional probability structure with such high frequency data. This result provides us with evidence to…
We focus on the problem of market making in high-frequency trading. Market making is a critical function in financial markets that involves providing liquidity by buying and selling assets. However, the increasing complexity of financial…
We give a simple explicit formula for turnover reduction when a large number of alphas are traded on the same execution platform and trades are crossed internally. We model turnover reduction via alpha correlations. Then, for a large number…
Asynchronous trading in high-frequency financial markets introduces significant biases into econometric analysis, distorting risk estimates and leading to suboptimal portfolio decisions. Existing synchronization methods, such as the…
We introduce the stochastic multiplicative point process modelling trading activity of financial markets. Such a model system exhibits power-law spectral density S(f) ~ 1/f**beta, scaled as power of frequency for various values of beta…
We evaluate the average waiting time between observing the price of financial markets and the next price change, especially in an on-line foreign exchange trading service for individual customers via the internet. Basic technical idea of…
We introduce a new model in order to describe the fluctuation of tick-by-tick financial time series. Our model, based on marked point process, allows us to incorporate in a unique process the duration of the transaction and the…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or…
High Frequency Trading (HFT) represents an ever growing proportion of all financial transactions as most markets have now switched to electronic order book systems. The main goal of the paper is to propose continuous time equations which…
We analyze waiting times for price changes in a foreign currency exchange rate. Recent empirical studies of high frequency financial data support that trades in financial markets do not follow a Poisson process and the waiting times between…
Statistical analysis of high-frequency stock market order transaction data is conducted to understand order transition dynamics. We employ a first-order time-homogeneous discrete-time Markov chain model to the sequence of orders of stocks…
We build an agent-based model to study how the interplay between low- and high-frequency trading affects asset price dynamics. Our main goal is to investigate whether high-frequency trading exacerbates market volatility and generates flash…
The analysis which assumes that tick by tick data is linear may lead to wrong conclusions if the underlying process is multiplicative. We compare data analysis done with the return and stock differences and we study the limits within the…
We describe an exact approach for calculating transition probabilities and waiting times in finite-state discrete-time Markov processes. All the states and the rules for transitions between them must be known in advance. We can then…