A single queue-reactive Hawkes model for the order flow

Peng Wu, Marcello Rambaldi, Jean-François Muzy () and Emmanuel Bacry ()
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Peng Wu: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Marcello Rambaldi: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Jean-François Muzy: SPE - Laboratoire « Sciences pour l’Environnement » (UMR CNRS 6134 SPE) - CNRS - Centre National de la Recherche Scientifique - Università di Corsica Pasquale Paoli [Université de Corse Pascal Paoli]
Emmanuel Bacry: CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this work, we introduce a multivariate Hawkes model with an explicit dependency on queue size aimed at modeling the stochastic time evolution of a single queue (best bid queue or best ask queue) of a limit order book. The order flow at a given best queue is modeled using a multivariate Hawkes process whose exogenous intensity depends on the current state on the queue. We provide an explicit way to calibrate this model with a Maximum-Likelihood method. Empirical results show that our model improves the description of the order flow properties and the shape of the queue distributions.

Date: 2023
Note: View the original document on HAL open archive server: https://hal.science/hal-02409073v1
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Published in Market microstructure and liquidity, 2023, ⟨10.1142/S2382626620500136⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02409073

DOI: 10.1142/S2382626620500136

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