Discussion Paper

No. 2011-32 | August 15, 2011
Modelling Trades-Through in a Limited Order Book Using Hawkes Processes

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

JEL Classification

C32 C51 G14

Cite As

Ioane Muni Toke and Fabrizio Pomponio (2011). Modelling Trades-Through in a Limited Order Book Using Hawkes Processes. Economics Discussion Papers, No 2011-32, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2011-32

Assessment



Comments and Questions


Anonymous - Referee Report 1
December 19, 2011 - 08:32

see attached file


Anonymous - Quick answers and comments from the authors
December 21, 2011 - 10:30

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Anonymous - Referee Report 2
April 16, 2012 - 08:50

see attached file