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

  • Toke, Ioane Muni
  • Pomponio, Fabrizio
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    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.

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    File URL: http://www.economics-ejournal.org/economics/discussionpapers/2011-32
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    File URL: http://econstor.eu/bitstream/10419/48827/1/666343829.pdf
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    Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2011-32.

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    Date of creation: 2011
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    Handle: RePEc:zbw:ifwedp:201132
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    1. Clive G. Bowsher, 2003. "Modelling Security Market Events in Continuous Time: Intensity Based, Multivariate Point Process Models," Economics Papers 2003-W03, Economics Group, Nuffield College, University of Oxford.
    2. Jean-Philippe Bouchaud & J. Doyne Farmer & Fabrizio Lillo, 2008. "How markets slowly digest changes in supply and demand," Papers 0809.0822, arXiv.org.
    3. 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.
    4. Large, Jeremy, 2007. "Measuring the resiliency of an electronic limit order book," Journal of Financial Markets, Elsevier, vol. 10(1), pages 1-25, February.
    5. E. Bacry & S. Delattre & M. Hoffmann & J. F. Muzy, 2011. "Modeling microstructure noise with mutually exciting point processes," Papers 1101.3422, arXiv.org.
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