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A Discrete-State Continuous-Time Model of Financial Transactions Prices and Times
Journal of business & economic statistics
Financial transaction prices typically lie on a discrete grid of values and arrive at random times. This paper proposes an econometric model with this structure. The distribution of each price change is a multinomial, conditional on past information and the time interval between the transactions. The proposed autoregressive conditional multinomial model is not restricted to be markov or symmetric in response to shocks, however such restrictions can be imposed. The duration between trades isdoi:10.1198/073500104000000541 fatcat:q4fp3wyayzdljfstoc53upt6xi