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Modelling trades-through in a limit order book using hawkes processes

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  • Toke, Ioane Muni
  • Pomponio, Fabrizio
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    Abstract

    The authors model trades-through, i.e. transactions that reach at least the second level of limit orders in an order book. Using tick-by-tick data on Euronext-traded stocks, they show that a simple bivariate Hawkes process fits nicely their empirical observations of tradesthrough. The authors show that the cross-influence of bid and ask trades-through is weak. --

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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2012-22
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    File URL: http://econstor.eu/bitstream/10419/59452/1/718124189.pdf
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    Bibliographic Info

    Article provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.

    Volume (Year): 6 (2012)
    Issue (Month): 22 ()
    Pages: 1-23

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    Handle: RePEc:zbw:ifweej:201222

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    Related research

    Keywords: Hawkes processes; limit order book; trades-through; high-frequency trading; microstructure;

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    References

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    1. Bowsher, Clive G., 2007. "Modelling security market events in continuous time: Intensity based, multivariate point process models," Journal of Econometrics, Elsevier, vol. 141(2), pages 876-912, December.
    2. E. Bacry & S. Delattre & M. Hoffmann & J. F. Muzy, 2011. "Modeling microstructure noise with mutually exciting point processes," Papers 1101.3422, arXiv.org.
    3. Large, Jeremy, 2007. "Measuring the resiliency of an electronic limit order book," Journal of Financial Markets, Elsevier, vol. 10(1), pages 1-25, February.
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    Cited by:
    1. Giacomo Bormetti & Lucio Maria Calcagnile & Michele Treccani & Fulvio Corsi & Stefano Marmi & Fabrizio Lillo, 2013. "Modelling systemic price cojumps with Hawkes factor models," Papers 1301.6141, arXiv.org, revised Mar 2013.

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