M. Hoffmann

  1. Modeling microstructure noise with mutually exciting point processes.

    Authors: E. Bacry, J.F. Muzy, S. Delattre, M. Hoffmann
    Subjects: Trading and Market Microstructure
    Abstract

    We introduce a new stochastic model for the variations of asset prices at the
    tick-by-tick level in dimension 1 (for a single asset) and 2 (for a pair of
    assets). The construction is based on marked point processes and relies on
    linear self and mutually exciting stochastic intensities as introduced by
    Hawkes. We associate a counting process with the positive and negative jumps of
    an asset price. By coupling suitably the stochastic intensities of upward and
    downward changes of prices for several assets simultaneously, we can reproduce
    microstructure noise (i.e.

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