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EnglishIn this work we discuss the problem of price definition when using high frequency foreign exchange data. If one uses the spot mid price a strong autocorrelation of returns, at one lag, is found which is only due to microstructure effect and does not capture the real behavior of price dynamics. This autocorrelation increases the intraday volatility estimated from this type of data. To solve this problem we introduce an algorithm which is able, by using the no-arbitrage principle, of eliminating every microstructure effects. (C) 2004 Elsevier B.V. All rights reserved.
http://hdl.handle.net/11697/11528| Titolo: | Real prices from spot foreign exchange market |
| Autori interni: | SERVA, Maurizio |
| Data di pubblicazione: | 2004 |
| Rivista: | PHYSICA. A |
| Abstract: | In this work we discuss the problem of price definition when using high frequency foreign exchange data. If one uses the spot mid price a strong autocorrelation of returns, at one lag, is found which is only due to microstructure effect and does not capture the real behavior of price dynamics. This autocorrelation increases the intraday volatility estimated from this type of data. To solve this problem we introduce an algorithm which is able, by using the no-arbitrage principle, of eliminating every microstructure effects. (C) 2004 Elsevier B.V. All rights reserved. |
| Handle: | http://hdl.handle.net/11697/11528 |
| Appare nelle tipologie: | 1.1 Articolo in rivista |
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