Market Microstructure and Liquidity· 2015
Hawkes Processes in Finance
- 416citations
- 2015year
Short summary
Hawkes processes, a class of multivariate point processes, are increasingly used in high-frequency finance to model phenomena like volatility, market stability, and systemic risk contagion.
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Key points
- Hawkes processes are a class of multivariate point processes.
- They have become popular in empirical high-frequency finance.
- Applications include volatility estimation, market stability, systemic risk, optimal execution, and order book dynamics.
AI-generated from the title and abstract; the full text is not read.
Abstract
In this paper we propose an overview of the recent academic literature devoted to the applications of Hawkes processes in finance. Hawkes processes constitute a particular class of multivariate point processes that has become very popular in empirical high-frequency finance this last decade. After a reminder of the main definitions and properties that characterize Hawkes processes, we review their main empirical applications to address many different problems in high-frequency finance. Because of their great flexibility and versatility, we show that they have been successfully involved in issues as diverse as estimating the volatility at the level of transaction data, estimating the market stability, accounting for systemic risk contagion, devising optimal execution strategies or capturing the dynamics of the full order book.
The authors' abstract, as published at the source. Market Microstructure and Liquidity, 2015 · DOI ↗
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Field: Applied Mathematics
Applied MathematicsMathematics