Exercise Solution 4.10

Various solutions are possible for this exercise. Consider the following.

1. Measure time t in trading days. Consider a time series ^tx of daily settlement prices for a particular futures contract. Each day’s settlement price is set by the exchange at the close of trading each day.
2. Measure time t in trading days. Consider a time series ^tx of daily closing prices for a particular stock. Each day’s closing price is the price of the day’s last transaction in that stock, and the stock’s last transaction could occur at any point during the trading day.