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Recurrent neural network based parameter estimation of Hawkes model on high-frequency financial data

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  • Lee, Kyungsub

Abstract

This study examines the use of a recurrent neural network for estimating the parameters of a Hawkes model based on high-frequency financial data, and subsequently, for computing volatility. Neural networks have shown promising results in various fields, and interest in finance is also growing. Our approach demonstrates significantly faster computational performance compared to traditional maximum likelihood estimation methods while yielding comparable accuracy in both simulation and empirical studies. Furthermore, we demonstrate the application of this method for real-time volatility measurement, enabling the continuous estimation of financial volatility as new price data keeps coming from the market.

Suggested Citation

  • Lee, Kyungsub, 2023. "Recurrent neural network based parameter estimation of Hawkes model on high-frequency financial data," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002945
    DOI: 10.1016/j.frl.2023.103922
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    References listed on IDEAS

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    1. E. Bacry & S. Delattre & M. Hoffmann & J. F. Muzy, 2013. "Modelling microstructure noise with mutually exciting point processes," Quantitative Finance, Taylor & Francis Journals, vol. 13(1), pages 65-77, January.
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    5. Lee, Kyungsub & Seo, Byoung Ki, 2017. "Marked Hawkes process modeling of price dynamics and volatility estimation," Journal of Empirical Finance, Elsevier, vol. 40(C), pages 174-200.
    6. Emmanuel Bacry & Sylvain Delattre & Marc Hoffmann & Jean-François Muzy, 2013. "Modelling microstructure noise with mutually exciting point processes," Post-Print hal-01313995, HAL.
    7. Kyungsub Lee, 2022. "Application of Hawkes volatility in the observation of filtered high-frequency price process in tick structures," Papers 2207.05939, arXiv.org.
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    More about this item

    Keywords

    High-frequency stock price; Hawkes model; Neural network; Estimation; Volatility;
    All these keywords.

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics

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