Journal of Financial Markets Vol. 2 No. 1 1999
Security bid/ask dynamics with discreteness and clustering: Simple strategies for modeling and estimation
open access
Abstract
This paper proposes a dynamic model of bid and ask quotes that incorporates a stochastic cost of market-making, discreteness (restriction of quotes to a fixed grid) and clustering (the tendency of quotes to lie on `natural' multiples of the tick size). The Gibbs sampler provides a convenient vehicle for estimation. The model is estimated for daily and intradaily US Dollar/Deutschemark Reuters quotes.
- DOI
- 10.1016/s1386-4181(98)00008-1
- Volume
- 2
- Issue
- 1
- Pages
- 1-28
- Language
- en
- Sources
- crossref openalex