Limit Order Book Dynamics and Order Size Modelling Using Compound Hawkes Process
CoRR(2023)
摘要
Hawkes Process has been used to model Limit Order Book (LOB) dynamics in
several ways in the literature however the focus has been limited to capturing
the inter-event times while the order size is usually assumed to be constant.
We propose a novel methodology of using Compound Hawkes Process for the LOB
where each event has an order size sampled from a calibrated distribution. The
process is formulated in a novel way such that the spread of the process always
remains positive. Further, we condition the model parameters on time of day to
support empirical observations. We make use of an enhanced non-parametric
method to calibrate the Hawkes kernels and allow for inhibitory
cross-excitation kernels. We showcase the results and quality of fits for an
equity stock's LOB in the NASDAQ exchange.
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