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A single queue-reactive Hawkes model for the order flow

Author

Listed:
  • Peng Wu

    (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

  • Marcello Rambaldi

    (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

  • Jean-François Muzy

    (SPE - Sciences pour l'environnement - UPP - Université Pascal Paoli - CNRS - Centre National de la Recherche Scientifique)

  • Emmanuel Bacry

    (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this work, we introduce a multivariate Hawkes model with an explicit dependency on queue size aimed at modeling the stochastic time evolution of a single queue (best bid queue or best ask queue) of a limit order book. The order flow at a given best queue is modeled using a multivariate Hawkes process whose exogenous intensity depends on the current state on the queue. We provide an explicit way to calibrate this model with a Maximum-Likelihood method. Empirical results show that our model improves the description of the order flow properties and the shape of the queue distributions.

Suggested Citation

  • Peng Wu & Marcello Rambaldi & Jean-François Muzy & Emmanuel Bacry, 2023. "A single queue-reactive Hawkes model for the order flow," Post-Print hal-02409073, HAL.
    • Handle: RePEc:hal:journl:hal-02409073
    DOI: 10.1142/S2382626620500136
    Note: View the original document on HAL open archive server: https://hal.science/hal-02409073
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    References listed on IDEAS

    as
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    5. Maxime Morariu-Patrichi & Mikko Pakkanen, 2018. "State-dependent Hawkes processes and their application to limit order book modelling," CREATES Research Papers 2018-26, Department of Economics and Business Economics, Aarhus University.
    6. Marcello Rambaldi & Emmanuel Bacry & Fabrizio Lillo, 2017. "The role of volume in order book dynamics: a multivariate Hawkes process analysis," Quantitative Finance, Taylor & Francis Journals, vol. 17(7), pages 999-1020, July.
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    Full references (including those not matched with items on IDEAS)

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