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Marked Hawkes process modeling of price dynamics and volatility estimation

Kyungsub Lee and Byoung Ki Seo

Journal of Empirical Finance, 2017, vol. 40, issue C, 174-200

Abstract: A simple Hawkes model have been developed for the price tick structure dynamics incorporating market microstructure noise and trade clustering. In this paper, the model is extended with random mark to deal with more realistic price tick structures of equities. We examine the impact of jump in price dynamics to the future movements and dependency between the jump sizes and ground intensities. We also derive the volatility formula based on stochastic and statistical methods and compare with realized volatility in simulation and empirical studies. The marked Hawkes model is useful to estimate the intraday volatility similarly in the case of simple Hawkes model.

Keywords: Tick price dynamics; Marked Hawkes process; Volatility; Ultra-high-frequency data; Impact of mark (search for similar items in EconPapers)
JEL-codes: C13 C51 C61 G17 (search for similar items in EconPapers)
Date: 2017
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Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

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Handle: RePEc:eee:empfin:v:40:y:2017:i:c:p:174-200