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

18 Pages Posted: 17 Dec 2011  

Ioane Muni Toke

Ecole Centrale Paris

Fabrizio Pomponio

Ecole Centrale Paris; BNP Paribas

Date Written: 2011

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.

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

JEL Classification: C32, C51, G14

Suggested Citation

Muni Toke, Ioane and Pomponio, Fabrizio, Modelling Trades-Through in a Limited Order Book Using Hawkes Processes (2011). Economics Discussion Paper No. 2011-32. Available at SSRN: https://ssrn.com/abstract=1973856 or http://dx.doi.org/10.2139/ssrn.1973856

Ioane Muni Toke (Contact Author)

Ecole Centrale Paris ( email )

Paris
France

Fabrizio Pomponio

Ecole Centrale Paris ( email )

Paris
France

BNP Paribas ( email )

Paris
France

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