Hawkes processes, microstructure and market impact

Mark Hoffmann (Université Paris Dauphine)
Thursday, December 18, 2014 - 5:00pm
HU Berlin, Rudower Chaussee 25, 12489 Berlin, Room 1.115

I will first shortly review the issue of obtaining simple lattice price models for assets observed at fine temporal scales that are 1) able to reproduce microstructure effects like variance noise or the Epps effect and 2) behave like continuous semimartingales compatible with the theory of arbitrage on large diffusive scales. The use of mutually exciting point processes enable to track such microstruture effects across scales and I will present some recent (and less recent) models based on Hawkes processes. In a second part, I will show that beyond the attractivity of their analytical tractability, Hawkes process enable to reproduce some market impact effects and exhibit simple links between market resilience and microstructure effects.