Title: Hawkes processes with a state-dependent factor
Authors: Ioane Muni Toke - CentraleSupelec (France) [presenting]
Abstract: A point process model is proposed for order flows in limit order books, in which the conditional intensity is the product of a Hawkes component and a state-dependent factor. In the LOB context, state observations may include the observed imbalance or the observed spread. We provide full technical details for the computationally efficient estimation of such processes, using either direct likelihood maximization or EM-type estimation. Applications include models for bid and ask market orders, or for upwards and downwards price movements. Empirical results on multiple stocks traded in Euronext Paris underline the benefits of state-dependent formulations for LOB modeling, e.g. in terms of goodness-of-fit to financial data.