General Compound Hawkes Processes in Limit Order Books
Trading and Market Microstructure
2018-12-07 v1 Mathematical Finance
Abstract
In this paper, we study various new Hawkes processes. Specifically, we construct general compound Hawkes processes and investigate their properties in limit order books. With regards to these general compound Hawkes processes, we prove a Law of Large Numbers (LLN) and a Functional Central Limit Theorems (FCLT) for several specific variations. We apply several of these FCLTs to limit order books to study the link between price volatility and order flow, where the volatility in mid-price changes is expressed in terms of parameters describing the arrival rates and mid-price process.
Keywords
Cite
@article{arxiv.1812.02298,
title = {General Compound Hawkes Processes in Limit Order Books},
author = {Anatoliy Swishchuk and Aiden Huffman},
journal= {arXiv preprint arXiv:1812.02298},
year = {2018}
}
Comments
27 pages, 31 figues, 9 tables. arXiv admin note: substantial text overlap with arXiv:1706.07459