Phys. Rev. E 67, 021112 (2003) [10 pages]Continuous-time random-walk model for financial distributionsReceived 22 October 2002; published 27 February 2003 We apply the formalism of the continuous-time random walk to the study of financial data. The entire distribution of prices can be obtained once two auxiliary densities are known. These are the probability densities for the pausing time between successive jumps and the corresponding probability density for the magnitude of a jump. We have applied the formalism to data on the U.S. dollar–deutsche mark future exchange, finding good agreement between theory and the observed data. © 2003 The American Physical Society URL:
http://link.aps.org/doi/10.1103/PhysRevE.67.021112
DOI:
10.1103/PhysRevE.67.021112
PACS:
05.40.Jc, 89.65.Gh, 02.50.Ey, 05.45.Tp
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