Discussion Paper
No. 2011-32 |
August 15, 2011
Modelling Trades-Through in a Limited Order Book Using Hawkes Processes
(Published in New Approaches in Quantitative Modeling of Financial Markets)
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.Paper submitted to the special issue New Approaches in Quantitative Modeling of Financial Markets
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