Related papers: Endogenous Liquidity Crises
We model the arrival of mid-price changes in the E-Mini S&P futures contract as a self-exciting Hawkes process. Using several estimation methods, we find that the Hawkes kernel is power-law with a decay exponent close to -1.15 at short…
The Hawkes model is suitable for describing self and mutually exciting random events. In addition, the exponential decay in the Hawkes process allows us to calculate the moment properties in the model. However, due to the complexity of the…
A point process model for order flows in limit order books is proposed, in which the conditional intensity is the product of a Hawkes component and a state-dependent factor. In the LOB context, state observations may include the observed…
The ability to robustly and efficiently control the dynamics of nonlinear systems lies at the heart of many current technological challenges, ranging from drug delivery systems to ensuring flight safety. Most such scenarios are too complex…
We study deterministic continuous-time lossy dynamical flow networks with constant exogenous demands, fixed routing, and finite flow and buffer capacities. In the considered model, when the total net flow in a cell ---consisting of the…
In this study, we introduce a physical model inspired by statistical physics for predicting price volatility and expected returns by leveraging Level 3 order book data. By drawing parallels between orders in the limit order book and…
The paper discusses various practical consequences of treating economics and finance as an inherently dynamic and chaotic system. On the theoretical side this looks at the general applicability of the market-making pricing approach to…
In financial markets, liquidity is not constant over time but exhibits strong seasonal patterns. In this article we consider a limit order book model that allows for time-dependent, deterministic depth and resilience of the book and…
We introduce a multivariate Hawkes process that accounts for the dynamics of market prices through the impact of market order arrivals at microstructural level. Our model is a point process mainly characterized by 4 kernels associated with…
Through the analysis of a dataset of ultra high frequency order book updates, we introduce a model which accommodates the empirical properties of the full order book together with the stylized facts of lower frequency financial data. To do…
In this paper we investigate the endogenous information contained in four liquidity variables at a five minutes time scale on equity markets around the world: the traded volume, the bid-ask spread, the volatility and the volume at first…
Market information events are generated intermittently and disseminated at high speeds in real-time. Market participants consume this high-frequency data to build limit order books, representing the current bids and offers for a given…
We extend a linear version of the liquidity risk model of Cetin et al. (2004) to allow for price impacts. We show that the impact of a market order on prices depends on the size of the transaction and the level of liquidity. We obtain a…
We investigate the behavior of limit order books on the meso-scale motivated by order execution scheduling algorithms. To do so we carry out empirical analysis of the order flows from market and limit order submissions, aggregated from…
In this paper we introduce two new Hawkes processes, namely, compound and regime-switching compound Hawkes processes, to model the price processes in limit order books. We prove Law of Large Numbers and Functional Central Limit Theorems…
We introduce a model for limit order book of a certain security with two main features: First, both the limit orders and market orders for the given asset are allowed to appear and interact with each other. Second, the high frequency…
We study statistical aspects of state-dependent Hawkes processes, which are an extension of Hawkes processes where a self- and cross-exciting counting process and a state process are fully coupled, interacting with each other. The…
The Hawkes process has garnered attention in recent years for its suitability to describe the behavior of online information cascades. Here, we present a fully tractable approach to analytically describe the distribution of the number of…
This paper proposes a parametric approach for stochastic modeling of limit order markets. The models are obtained by augmenting classical perfectly liquid market models by few additional risk factors that describe liquidity properties of…
We study a linear price impact model including other liquidity takers, whose flow of orders either follows a Poisson or a Hawkes process. The optimal execution problem is solved explicitly in this context, and the closed-formula optimal…