A characteristic time scale of tick quotes on foreign currency markets

Abstract

This study investigates that a characteristic time scale on an exchange rate market (USD/JPY) is examined for the period of 1998 to 2000. Calculating power spectrum densities for the number of tick quotes per minute and averaging them over the year yield that the mean power spectrum density has a peak at high frequencies. Consequently it means that there exist the characteristic scales which dealers act in the market. A simple agent model to explain this phenomenon is proposed. This phenomena may be a result of stochastic resonance with exogenous periodic information and physiological fluctuations of the agents. This may be attributed to the traders' behavior on the market. The potential application is both quantitative characterization and classification of foreign currency markets.