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Discrete-valued Levy processes and low latency financial econometrics

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  • Ole E. Barndorff-Nielsen

    ()
    (The T.N. Thiele Centre for Mathematics in Natural Science, Department of Mathematical Sciences, University of Aarhus, Ny Munkegade, DK-8000 Aarhus C, Denmark & CREATES, University of Aarhus)

  • David G. Pollard

    ()
    (AHL Research, Man Research Laboratory, Eagle House, Walton Well Road, Oxford OX2 6ED, UK)

  • Neil Shephard

    ()
    (Oxford-Man Institute, University of Oxford, Eagle House, Walton Well Road, Oxford OX2 6ED, UK, & Department of Economics, University of Oxford)

Abstract

Motivated by features of low latency data in finance we study in detail discrete-valued Levy processes as the basis of price processes for high frequency econometrics. An important case of this is a Skellam process, which is the difference of two independent Poisson processes. We propose a natural generalisation which is the difference of two negative binomial processes. We apply these models in practice to low latency data for a variety of different types of futures contracts.

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File URL: http://www.nuffield.ox.ac.uk/economics/papers/2010/w4/skellam180610.pdf
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2010-W04.

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Length: 29 pages
Date of creation: 18 Jun 2010
Date of revision:
Handle: RePEc:nuf:econwp:1004

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Web page: http://www.nuff.ox.ac.uk/economics/

Related research

Keywords: futures markets; high frequency econometrics; low latency data; negative binomial; Skellam distribution.;

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