A scaling limit for limit order books driven by Hawkes processes
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Publication:5227409
DOI10.1137/17M1148682zbMATH Open1422.91803arXiv1709.01292OpenAlexW2963919247MaRDI QIDQ5227409FDOQ5227409
Authors: Ulrich Horst, Wei Xu 
Publication date: 26 July 2019
Published in: SIAM Journal on Financial Mathematics (Search for Journal in Brave)
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.
Full work available at URL: https://arxiv.org/abs/1709.01292
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Point processes (e.g., Poisson, Cox, Hawkes processes) (60G55) Functional limit theorems; invariance principles (60F17) Actuarial science and mathematical finance (91G99)
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Cited In (18)
- Scaling limits of processes with fast nonlinear mean reversion
- Multivariate Hawkes processes with simultaneous occurrence of excitation events coming from different sources
- Limits of Limit-Order Books
- Coupling limit order books and branching random walks
- High-dimensional Hawkes processes for limit order books: modelling, empirical analysis and numerical calibration
- Long-time behavior of a Hawkes process-based limit order book
- Modelling of limit order books by general compound Hawkes processes with implementations
- A functional limit theorem for limit order books with state dependent price dynamics
- Diffusion approximations for self-excited systems with applications to general branching processes
- Functional limit theorems for marked Hawkes point measures
- A few simulation results of basic models of limit order books
- Modelling bid and ask prices using constrained Hawkes processes: ergodicity and scaling limit
- A Gamma Ornstein-Uhlenbeck model driven by a Hawkes process
- Scaling limit of a limit order book model via the regenerative characterization of Lévy trees
- Multivariate Hawkes-based models in limit order book: European and spread option pricing
- The microstructure of stochastic volatility models with self-exciting jump dynamics
- A Law of Large Numbers for Limit Order Books
- The Malliavin-Stein method for Hawkes functionals
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