A scaling limit for limit order books driven by Hawkes processes
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Publication:5227409
Abstract: In this paper we derive a scaling limit for an infinite dimensional limit order book model driven by Hawkes random measures. The dynamics of the incoming order flow is allowed to depend on the current market price as well as on a volume indicator. With our choice of scaling the dynamics converges to a coupled SDE-ODE system where limiting best bid and ask price processes follows a diffusion dynamics, the limiting volume density functions follows an ODE in a Hilbert space and the limiting order arrival and cancellation intensities follow a Volterra-Fredholm integral equation.
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- Multivariate Hawkes processes with simultaneous occurrence of excitation events coming from different sources
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- A functional limit theorem for limit order books with state dependent price dynamics
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- The microstructure of stochastic volatility models with self-exciting jump dynamics
- Multivariate Hawkes-based models in limit order book: European and spread option pricing
- A Law of Large Numbers for Limit Order Books
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