A Financial Market Model with Trading Volume and Stochastic Volatility

The paper describes a continuous time financial market model, where the basic factord are trading volumes per unit time. These are modelled by squared Bessel processes. The asset prices are formed by rations of these trading volumes. They have leptokurtic return distributions and stochastic volatilities with properties that are similar to those observed in practice. For the market index the model generates naturally the well-known leverage effect due to negative correlation between the index and its volatility.