In this paper we present a rather general phenomenological theory of tick-by-tick dynamics in financial markets. Many well-known aspects, such as the Lévy scaling form, follow as particular cases of the theory. The theory fully takes into account the non-Markovian and non-local character of financial time series. Predictions on the long-time behaviour of the waiting-time probability density are presented. Finally, a general scaling form is given, based on the solution of the fractional diffusion equation.
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Paper provided by EconWPA in its series Finance with number
0411007.
Length: 11 pages Date of creation: 05 Nov 2004 Date of revision: Handle: RePEc:wpa:wuwpfi:0411007
Note: Type of Document - pdf; pages: 11. Preprint pdf version of a paper published in Physica A, vol.284, p.376-384, 2000. Contact details of provider: Web page: http://129.3.20.41
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