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An inflated multivariate integer count hurdle model : an application to bid and ask quote dynamics
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Bien, Katarzyna, Nolte, Ingmar and Pohlmeier, Winfried (2009) An inflated multivariate integer count hurdle model : an application to bid and ask quote dynamics. Journal of Applied Econometrics, Volume 26 (Number 4). pp. 669-707. doi:10.1002/jae.1122 ISSN 0883-7252.
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Official URL: http://dx.doi.org/10.1002/jae.1122
Abstract
In this paper we develop a model for the conditional inflated multivariate density of integer count variables with domain Z(n), n is an element of N. Our modelling framework is based on a copula approach and can be used for a broad set of applications where the primary characteristics of the data are: (i) discrete domain; (ii) the tendency to cluster at certain outcome values; and (iii) contemporaneous dependence. These kinds of properties can be found for high- or ultra-high-frequency data describing the trading process on financial markets. We present a straightforward sampling method for such an inflated multivariate density through the application of an independence Metropolis-Hastings sampling algorithm. We demonstrate the power of our approach by modelling the conditional bivariate density of bid and ask quote changes in a high-frequency setup. We show how to derive the implied conditional discrete density of the bid-ask spread, taking quote clusterings (at multiples of 5 ticks) into account. Copyright (C) 2009 John Wiley & Sons, Ltd.
| Item Type: | Journal Article | ||||
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| Subjects: | H Social Sciences > HG Finance Q Science > QA Mathematics |
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Financial Econometrics Research Centre Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Multivariate analysis, Copulas (Mathematical statistics), Finance -- Mathematical models | ||||
| Journal or Publication Title: | Journal of Applied Econometrics | ||||
| Publisher: | Wiley-Blackwell Publishing, Inc | ||||
| ISSN: | 0883-7252 | ||||
| Official Date: | 2009 | ||||
| Dates: |
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| Volume: | Volume 26 | ||||
| Number: | Number 4 | ||||
| Number of Pages: | 39 | ||||
| Page Range: | pp. 669-707 | ||||
| DOI: | 10.1002/jae.1122 | ||||
| Status: | Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Access rights to Published version: | Restricted or Subscription Access | ||||
| Funder: | European Commission (EC) | ||||
| Grant number: | HPRN-CT-2002-00232 (EC) |
Data sourced from Thomson Reuters' Web of Knowledge
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