| Title: | Security Bid/Ask Dynamics with Discreteness and Clustering: Simple Strategies for Modeling and Estimation |
| Authors: | Hasbrouck, Joel |
| Keywords: | Quotes;foreign exchange;Gibbs sampler;Markov chain Monte Carlo;discreteness;clustering;security prices |
| Issue Date: | 5-Oct-1998 |
| Series/Report no.: | FIN-98-042 |
| 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. |
| URI: | http://hdl.handle.net/2451/26959 |
| Appears in Collections: | Economics Working Papers |
Files in This Item:
| File | Description | Size | Format | |
|---|---|---|---|---|
| wpa98042.pdf | 755.77 kB | Adobe PDF | View/Open |
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