Fractional calculus and continuous-time finance II: the waiting-time distribution
Francesco Mainardi (1), Marco Raberto (2), Rudolf Gorenflo (3), Enrico, Scalas (4) ((1) University of Bologna, (2) University of Genoa, (3) Free, University of Berlin, (4) University of East Piedmont)
TL;DR
This paper extends the CTRW model for financial market tick-by-tick dynamics, demonstrating its consistency with observed waiting-time distributions in BUND futures, thus enhancing understanding of market microstructure.
Contribution
It advances the CTRW framework by validating its applicability to real market data, specifically the waiting-time distribution of BUND futures.
Findings
CTRW model aligns with empirical waiting-time data
Provides a theoretical basis for market microstructure analysis
Supports the use of CTRW in high-frequency trading models
Abstract
We complement the theory of tick-by-tick dynamics of financial markets based on a Continuous-Time Random Walk (CTRW) model recently proposed by Scalas et al., and we point out its consistency with the behaviour observed in the waiting-time distribution for BUND future prices traded at LIFFE, London.
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Taxonomy
TopicsComplex Systems and Time Series Analysis · Financial Markets and Investment Strategies · Stochastic processes and financial applications