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Modeling share price evolution as a continuous time random walk (CTRW) with non-independent price changes and waiting times

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Author Info

  • Repetowicz, Przemysław
  • Richmond, Peter
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    Abstract

    A theory which describes the share price evolution at financial markets as a continuous time random walk has been generalized in order to take into account the dependence of waiting times t on price returns x. A joint probability density function φX,T(x,t), which uses the concept of a Lévy stable distribution, is worked out. The evolution equation is formulated and it is shown that the process is non-Markovian. Finally, the theory is fitted to market data.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378437104009161
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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 344 (2004)
    Issue (Month): 1 ()
    Pages: 108-111

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    Handle: RePEc:eee:phsmap:v:344:y:2004:i:1:p:108-111

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

    Related research

    Keywords: Stochastic processes; CTRW; Lévy distributions; Econophysics;

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    Cited by:
    1. Scalas, Enrico, 2006. "The application of continuous-time random walks in finance and economics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 362(2), pages 225-239.
    2. D’Amico, Guglielmo & Janssen, Jacques & Manca, Raimondo, 2009. "European and American options: The semi-Markov case," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(15), pages 3181-3194.

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