Modelling Trades-Through in a Limited Order Book Using Hawkes Processes

Abstract:     
We model trades-through, i.e. transactions that reach at least the second level of limit orders in an order book. Using tick-by-tick data on Euronext-traded stocks, we show that a simple bivariate Hawkes process fits nicely our empirical observations of trades-through. We show that the cross-influence of bid and ask trades-through is weak.

Number of Pages in PDF File: 18

Keywords: Hawkes processes, limit order book, trades-through, highfrequency trading, microstructure

JEL Classification: C32, C51, G14

working papers series