From Hawkes-type processes to stochastic volatility
classification
🧮 math.PR
keywords
instrumentintroducelimitprocessvolatilityarrivalsbecomescorrelation
read the original abstract
We introduce a Hawkes-like process and study its scaling limit as the system becomes increasingly endogenous. We derive functional limit theorems for intensity and fluctuations. Then, we introduce a high-frequency model for a price of a liquid traded financial instrument in which the nearly unstable regime leads to a Heston-type process where the negative correlation between the noise driving the proce of the instrument and the volatility can be viewed as a result of high variance of the sell-side order arrivals.
This paper has not been read by Pith yet.
discussion (0)
Sign in with ORCID, Apple, or X to comment. Anyone can read and Pith papers without signing in.