Related papers: Endogenous Liquidity Crises
A simple Hawkes model have been developed for the price tick structure dynamics incorporating market microstructure noise and trade clustering. In this paper, the model is extended with random mark to deal with more realistic price tick…
We propose the Hawkes flocking model that assesses systemic risk in high-frequency processes at the two perspectives -- endogeneity and interactivity. We examine the futures markets of WTI crude oil and gasoline for the past decade, and…
When liquids are classified using Tg -scaled Arrhenius plots of relaxation times (or relative rates of entropy increase above Tg) across a "strong-fragile" spectrum of behaviors, the "strong" liquids have always appeared rather…
We present a careful analysis of possible issues on the application of the self-excited Hawkes process to high-frequency financial data. We carefully analyze a set of effects leading to significant biases in the estimation of the…
The extent to which a matching engine can cloud the modelling of underlying order submission and management processes in a financial market remains an unanswered concern with regards to market models. Here we consider a 10-variate Hawkes…
Oft-cited causes of mini-flash crashes include human errors, endogenous feedback loops, the nature of modern liquidity provision, fundamental value shocks, and market fragmentation. We develop a mathematical model which captures aspects of…
We use random walks to simulate the fluid limit of two coupled diffusive limit order books to model correlation emergence. The model implements the arrival, cancellation and diffusion of orders coupled by a pairs trader profiting from the…
We study the conditions under which input-output networks can dynamically attain a competitive equilibrium, where markets clear and profits are zero. We endow a classical firm network model with minimal dynamical rules that reduce…
We propose a general non-linear order book model that is built from the individual behaviours of the agents. Our framework encompasses Markovian and Hawkes based models. Under mild assumptions, we prove original results on the ergodicity…
This chapter first presents a rather personal view of some different aspects of predictability, going in crescendo from simple linear systems to high-dimensional nonlinear systems with stochastic forcing, which exhibit emergent properties…
In this paper, we propose a new dynamical model to study the two-stage volatility evolution of stock market index after extreme events, and find that the volatility after extreme events follows a stretched exponential decay in the initial…
Limit order book (LOB) is a dynamic, event-driven system that records real-time market demand and supply for a financial asset in a stream flow. Event stream prediction in LOB refers to forecasting both the timing and the type of events.…
Experiments (Mullin and Kreswell, 2005) show that transition to turbulence can start at Reynolds numbers lower than it is predicted by the linear stability analysis - the subcritical transition to turbulence. To explain these observations…
High frequency financial data is burdened by a level of randomness that is unavoidable and obfuscates the task of modelling. This idea is reflected in the intraday evolution of limit orders book data for many financial assets and suggests…
We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical…
We propose a novel approach to generate chaotic business cycles in a deterministic setting. Rather than producing chaos endogenously, we consider aggregate economic models with limit cycles and equilibriums, subject them to chaotic…
We introduce a Markovian single point process model, with random intensity regulated through a buffer mechanism and a self-exciting effect controlling the arrival stream to the buffer. The model applies the principle of the Hawkes process…
The dynamic transition between the ordered flow and the plastic flow is studied for a two-dimensional driven vortex lattice, in the presence of sharp and dense pinning centers, from numerical simulations. For this system, which does not…
In two previous papers the author developed a second-order price adjustment (t\^atonnement) process. This paper extends the approach to include both quantity and price adjustments. We demonstrate three results: a analogue to physical…
We present a simple dynamic equilibrium model for an online exchange where both buyers and sellers arrive according to a exogenously defined stochastic process. The structure of this exchange is motivated by the limit order book mechanism…