Modeling Market Order Arrivals on the German Intraday Electricity Market With the Hawkes Process
24 Pages Posted: 26 Feb 2020 Last revised: 2 Mar 2020
Date Written: February 28, 2020
We analyze market order arrivals on the intraday market for hourly electricity deliveries in Germany. As we distinguish between buys and sells, we work in a multivariate setting. We model the arrivals with a Hawkes process with exponentially increasing baseline intensity and exponentially decaying excitements. Our goodness-of-fit tests indicate that the models where the conditional intensity of each market order type is excited at least by events of the same type are the most promising ones. Based on the Akaike information criterion, models with only self-excitement are selected slightly more often than models with self and cross-excitement. The typical jump size of the conditional intensities in case of the arrival of a market order of the same type is quite large yet rather short-lived. Diurnal patterns in the parameters of the baseline intensity and the branching ratio of the self-excitement are easily observable. Relationships between different parameters such as the jump size and decay rate of self and cross-excitement are found.
Keywords: Hawkes process, model selection, parameter interpretation, contemporaneous relationship, intraday electricity market
JEL Classification: C12, C13, C30, C51, C52, Q41
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