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.
In a continuous double auction (a common trading mechanism in many financial markets) waiting times between two consecutive trades vary at random.
τ
denote the duration (the waiting time between consecutive trades) and assume that
θ
are independent and identically distributed random variables, positive and with
and where the series
θ
θ
α
α
τ
α
τ
β
θ
τ
{\displaystyle \theta _{t}=\alpha _{0}+\alpha _{1}\tau _{t-1}+\cdots +\alpha _{q}\tau _{t-q}+\beta _{1}\theta _{t-1}+\cdots +\beta _{p}\theta _{t-p}=\alpha _{0}+\sum _{i=1}^{q}\alpha _{i}\tau _{t-i}+\sum _{i=1}^{p}\beta _{i}\theta _{t-i}}