Indeterminacy in foreign exchange market
Statistical Mechanics
2009-10-31 v1 Disordered Systems and Neural Networks
Statistical Finance
Abstract
We discuss price variations distributions in foreign exchange markets, characterizing them both in calendar and business time frameworks. The price dynamics is found to be the result of two distinct processes, a multi-variance diffusion and an error process. The presence of the latter, which dominates at short time scales, leads to indeterminacy principle in finance. Furthermore, dynamics does not allow for a scheme based on independent probability distributions, since volatility exhibits a strong correlation even at the shortest time scales.
Keywords
Cite
@article{arxiv.cond-mat/9906343,
title = {Indeterminacy in foreign exchange market},
author = {Michele Pasquini and Maurizio Serva},
journal= {arXiv preprint arXiv:cond-mat/9906343},
year = {2009}
}
Comments
11 pages, LaTeX2e, uses epsfig.sty, 3 eps figures, submitted to Journal of Business