Disentangling and quantifying market participant volatility contributions

Marcello Rambaldi, Emmanuel Bacry and Jean-François Muzy

Quantitative Finance, 2019, vol. 19, issue 10, 1613-1625

Abstract: Thanks to the access to labeled orders on the CAC 40 index future provided by Euronext, we are able to quantify market participants contributions to the volatility in the diffusive limit. To achieve this result, we leverage the branching properties of Hawkes point processes. We find that fast intermediaries (e.g. market maker type agents) have a smaller footprint on the volatility than slower, directional agents. The branching structure of Hawkes processes allows us to examine also the degree of endogeneity of each agent behavior, and we find that high-frequency traders are more endogenously driven than other types of agents.

Date: 2019
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DOI: 10.1080/14697688.2019.1591631

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