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Modelling trades-through in a limited order book using Hawkes processes


  • Toke, Ioane Muni
  • Pomponio, Fabrizio


We 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, we show that a simple bivariate Hawkes process fits nicely our empirical observations of trades-through. We show that the cross-influence of bid and ask trades-through is weak.

Suggested Citation

  • Toke, Ioane Muni & Pomponio, Fabrizio, 2011. "Modelling trades-through in a limited order book using Hawkes processes," Economics Discussion Papers 2011-32, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:201132

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    References listed on IDEAS

    1. Jean-Philippe Bouchaud & J. Doyne Farmer & Fabrizio Lillo, 2008. "How markets slowly digest changes in supply and demand," Papers 0809.0822,
    2. 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.
    3. 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.
    4. Lillo Fabrizio & Farmer J. Doyne, 2004. "The Long Memory of the Efficient Market," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 8(3), pages 1-35, September.
    5. 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. Simon Clinet & Yoann Potiron, 2016. "Statistical inference for the doubly stochastic self-exciting process," Papers 1607.05831,, revised Jun 2017.

    More about this item


    Hawkes processes; limit order book; trades-through; highfrequency trading; microstructure;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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