Quantitative and Comparative Analyses of Limit Order Books with General Compound Hawkes Processes

Qiyue He and Anatoliy Swishchuk
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Qiyue He: Department of Mathematics and Statistics, University of Calgary, 2500 University Drive NW, Calgary, AB T2N1N4, Canada
Anatoliy Swishchuk: Department of Mathematics and Statistics, University of Calgary, 2500 University Drive NW, Calgary, AB T2N1N4, Canada

Risks, 2019, vol. 7, issue 4, 1-21

Abstract: In this paper, we solve the problem of mid price movements arising in high-frequency and algorithmic trading using real data. Namely, we introduce different new types of General Compound Hawkes Processes (GCHPDO, GCHP2SDO, GCHPnSDO) and find their diffusive limits to model the mid price movements of 6 stocks-EBAY, FB, MU, PCAR, SMH, CSCO. We also define error rates to estimate the models fitting accuracy. Maximum Likelihood Estimation (MLE) and Particle Swarm Optimization (PSO) are used for Hawkes processes and models parameters’ calibration.

Keywords: general compound Hawkes process; diffusive limit; maximum likelihood estimation (MLE); particle swarm optimization (PSO); error measurements (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:7:y:2019:i:4:p:110-:d:282628

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