JSIAM Letters
Online ISSN : 1883-0617
Print ISSN : 1883-0609
ISSN-L : 1883-0617
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Testing whether the Nikkei225 best bid/ask price path follows the first order discrete Markov chain - an approach in terms of the total “$\rho$-variation" -
Meng LiKazuo Kishimoto
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JOURNALS FREE ACCESS

2010 Volume 2 Pages 103-106

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Abstract

This paper empirically shows that in the days near the last trading day of Nikkei 225 Futures the best bid/ask prices follows the highly negatively correlated first order Markov process, and has no trend up to four ticks based on the total $\rho$-variation. This is consistent with the model by Endo et al. and the empirical results therein by different approach. It also derives the theoretical asymptotic formula for the total $\rho$-variation when the process follows the first order random Markov walks, and shows that its fit is satisfactory for $\rho\le 4$.

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© 2010 The Japan Society for Industrial and Applied Mathematics
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