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Disentangling and quantifying market participant volatility contributions

Marcello Rambaldi, Emmanuel Bacry and Jean-Fran\c{c}ois Muzy

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Abstract: Thanks to the access to labeled orders on the Cac40 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. We find that high-frequency traders are more endogenously driven than other types of agents.

New Economics Papers: this item is included in nep-mst
Date: 2018-07
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