General Compound Hawkes Processes in Limit Order Books

27 Pages Posted: 15 Nov 2018

See all articles by Anatoliy V. Swishchuk

Anatoliy V. Swishchuk

University of Calgary

Aiden Huffman

University of Calgary - Department of Mathematics and Statistics

Multiple version iconThere are 2 versions of this paper

Date Written: November 6, 2018

Abstract

In this paper, we study various new Hawkes processes. Specifically, we construct general compound Hawkes processes and investigate their properties in limit order books. With regards to these general compound Hawkes processes, we prove a Law of Large Numbers (LLN) and a Functional Central Limit Theorems (FCLT) for several specific variations. We apply several of these FCLTs to limit order books to study the link between price volatility and order flow, where the volatility in mid-price changes is expressed in terms of parameters describing the arrival rates and mid-price process.

Keywords: hawkes processes, general compound hawkes processes, limit order books, functional central limit theorems, LOBSTER data

JEL Classification: C02

Suggested Citation

Swishchuk, Anatoliy V. and Huffman, Aiden, General Compound Hawkes Processes in Limit Order Books (November 6, 2018). Available at SSRN: https://ssrn.com/abstract=3279778 or http://dx.doi.org/10.2139/ssrn.3279778

Anatoliy V. Swishchuk (Contact Author)

University of Calgary ( email )

University Drive
Calgary, Alberta T2N 1N4
Canada

Aiden Huffman

University of Calgary - Department of Mathematics and Statistics ( email )

University of Calgary
Calgary, Alberta
Canada

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