Modeling microstructure price dynamics with symmetric Hawkes and diffusion model using ultra-high-frequency stock data
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Publication:1655591
DOI10.1016/J.JEDC.2017.04.004zbMATH Open1401.91063arXiv1908.05089OpenAlexW2608916530WikidataQ58941459 ScholiaQ58941459MaRDI QIDQ1655591FDOQ1655591
Authors: Kyungsub Lee, Byoung Ki Seo 
Publication date: 9 August 2018
Published in: Journal of Economic Dynamics and Control (Search for Journal in Brave)
Abstract: This study examine the theoretical and empirical perspectives of the symmetric Hawkes model of the price tick structure. Combined with the maximum likelihood estimation, the model provides a proper method of volatility estimation specialized in ultra-high-frequency analysis. Empirical studies based on the model using the ultra-high-frequency data of stocks in the S&P 500 are performed. The performance of the volatility measure, intraday estimation, and the dynamics of the parameters are discussed. A new approach of diffusion analogy to the symmetric Hawkes model is proposed with the distributional properties very close to the Hawkes model. As a diffusion process, the model provides more analytical simplicity when computing the variance formula, incorporating skewness and examining the probabilistic property. An estimation of the diffusion model is performed using the simulated maximum likelihood method and shows similar patterns to the Hawkes model.
Full work available at URL: https://arxiv.org/abs/1908.05089
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Microeconomic theory (price theory and economic markets) (91B24) Stochastic models in economics (91B70)
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Cited In (5)
- Cojumps and asset allocation in international equity markets
- COMPUTATIONAL METHOD FOR PROBABILITY DISTRIBUTION ON RECURSIVE RELATIONSHIPS IN FINANCIAL APPLICATIONS
- A simple microstructure model based on the Cox-BESQ process with application to optimal execution policy
- Optimal market-making strategies under synchronised order arrivals with deep neural networks
- A switching microstructure model for stock prices
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