Discrete-valued Levy processes and low latency financial econometrics

Working paper

Motivated by features of low latency data in finance we study in detail discrete-valued Levy processes as the basis of price processes for high frequency econometrics. An important case of this is a Skellam process, which is the difference of two independent Poisson processes. We propose a natural generalisation which is the difference of two negative binomial processes. We apply these models in practice to low latency data for a variety of different types of futures contracts.

Authors: Shephard, N; Pollard, D; Barndorff-Nielsen, O

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2010-06-01
• Paper number: 490
• Keywords: high frequency econometrics; Skellam distribution; negative binomial; futures markets; low latency data