T. Bisig, A. Dupuis, V. Impagliazzo & Richard B. Olsen

Abstract

Prices in financial markets evolve as events occur. Events are typically market transactions, which may be correlated with each other, or news and political announcements. The price evolution occurs in many different forms and is difficult to describe concisely and systematically as price moves happen at all different price and time scales. For instance, a 1% price move can occur within a few seconds and the price jumps to its new level within a few minutes, and the price is subject to a secondary counter price move or, alternatively, for a few days the price may zig-zag within a narrow price range. These examples highlight the importance of creating a tool coming up with a concise abstraction that characterises the price evolution in a systematic manner so as to be a reliable representation of the state of the market at any point in time and after any type of market event, for example (Maillet and Michel 2005, Boucher et al. 2009). The tool would allow economic agents, be they governments or private and institutional investors, to take more informed decisions and adopt preemptive action in a crisis.