Relative Volume as a Doubly Stochastic Binomial Point Process
If intra-day volume is modelled as a Cox point process, then relative intra-day cumulative volume (intra-day cumulative volume divided by final total volume) is shown to be a novel generalization of a binomial point process; the doubly stochastic binomial point process. Re-scaling the intra-day traded volume to a relative volume between 0 (no volume traded) and 1 (daily trading completed) allows empirical intra-day volume distribution information for all stocks to be used collectively to estimate and identify the random intensity component of the binomial point process and closely related Cox point process. This is useful for Volume Weighted Average Price (VWAP) traders who require a stochastic model of relative intra-day cumulative volume to implement risk-optimal VWAP trading strategies.
|Date of creation:||01 Jan 2005|
|Publication status:||Published as: McCulloch, J., 2007, "Relative Volume as a Doubly Stochastic Binomial Point Process", Quantitative Finance, 7(1), 55-62.|
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- Tina Hviid Rydberg & Neil Shephard, 2000. "BIN Models for Trade-by-Trade Data. Modelling the Number of Trades in a Fixed Interval of Time," Econometric Society World Congress 2000 Contributed Papers 0740, Econometric Society.