High dimensional Hawkes processes for limit order books Modelling, empirical analysis and numerical calibration

Xiaofei Lu and Frédéric Abergel ()
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Xiaofei Lu: MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec
Frédéric Abergel: FiQuant - Chaire de finance quantitative - MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec, MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec

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Abstract: High-dimensional Hawkes processes with exponential kernels are used to describe limit order books in order-driven financial markets. The dependencies between orders of various types are carefully studied and modelled, based on a thorough empirical analysis. The observation of inhibition effects is particularly interesting, and leads us to the use of non-linear Hawkes processes. A specific attention is devoted to the calibration problem, in order to account for the high dimensionality of the problem and the very poor convexity properties of the MLE. Our analyses show a good agreement between the statistical properties of order book data and those of the model.

Keywords: high frequency data; non-convex optimization; Hawkes processes; limit order books (search for similar items in EconPapers)
Date: 2018-01-08
New Economics Papers: this item is included in nep-mst
Note: View the original document on HAL open archive server: https://hal.science/hal-01686122
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Citations: View citations in EconPapers (15)

Published in Quantitative Finance, 2018, ⟨10.1080/14697688.2017.1403142⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01686122

DOI: 10.1080/14697688.2017.1403142

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