Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 28, 2010 erstellt
Beschreibung:
The state of the exchange is characterized by an order book- number of lots that are asked or offered for each given price. Modeling the entire order book is too complex since there are too many variables to match, and the resulting model may not be realistic. Our approach is to model the state of the exchange using only a small number of parameters, where one parameter represents a price of the asset, and another parameter represents liquidity of the market. This is a compromise between modeling the entire order book, and modeling only one dimensional process that represents the price. The estimator of the price can be used to estimate other implied parameters of financial models, such as the volatility of an asset. The volatility estimator overcomes microstructure noise that is present in the high frequency data and thus one can obtain good volatility estimators even on very short time scales