Autoregressive conditional duration
In financial econometrics, an autoregressive conditional duration (ACD, Engle and Russell (1998)) model considers irregularly spaced and autocorrelated intertrade durations. ACD is analogous to GARCH. Indeed, in a continuous double auction (a common trading mechanism in many financial markets) waiting times between two consecutive trades vary at random.
Definition[]
Specifically, let denote the duration (the waiting time between consecutive trades) and assume that , where are independent and identically distributed random variables, positive and with and where the series is given by
and where , , , .
References[]
- Robert F. Engle and J.R. Russell. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data", Econometrica, 66:1127-1162, 1998.
- N. Hautsch. "Modelling Irregularly Spaced Financial Data", Springer, 2004.
Categories:
- Time series
- Mathematical finance