The Ctrw in Finance: Direct and Inverse Problems
17 Pages Posted: 10 Oct 2003
We study financial distributions within the framework of the continuous time random walk (CTRW). An earlier approach is modified to account for the possibility of obtaining the distribution of daily or longer-time prices, in addition to the existing model for intraday prices. We thus treat both the direct problem (from high-frequency data to low-frequency statistics) and indirect problem (from low-frequency data to high-frequency statistics). Finally the formalism is applied to actual financial data.
Keywords: random walks, financial markets, volatility, trading activity
JEL Classification: C10, D40, G10
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