Modelling Trades-Through in a Limited Order Book Using Hawkes Processes
Ioane Muni Toke
Ecole Centrale Paris
Ecole Centrale Paris; BNP Paribas
Economics Discussion Paper No. 2011-32
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
Date posted: December 17, 2011
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