AbstractThis paper extends the analysis of Muni Toke and Yoshida (2020) to the case of marked point processes. We consider multiple marked point processes with intensities defined by three multiplicative components, namely a common baseline intensity, a state-dependent component specific to each process, and a state-dependent component specific to each mark within each process. We show that for specific mark distributions, this model is a combination of the ratio models defined in Muni Toke and Yoshida (2020). We prove convergence results for the quasi-maximum and quasi-Bayesian likelihood estimators of this model and provide numerical illustrations of the asymptotic variances. We use these ratio processes to model transactions occurring in a limit order book. Model flexibility allows us to investigate both state-dependency (emphasizing the role of imbalance and spread as significant signals) and clustering. Calibration, model selection and prediction results are reported for high-frequency trading data on multiple stocks traded on Euronext Paris. We show that the marked ratio model outperforms other intensity-based methods (such as “pure” Hawkes-based methods) in predicting the sign and aggressiveness of market orders on financial markets.
State-dependent Hawkes processes and their application to limit order book modelling
