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Disentangling and quantifying market participant volatility contributions

Author

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  • Marcello Rambaldi
  • Emmanuel Bacry
  • Jean-François Muzy

Abstract

Thanks to the access to labeled orders on the CAC 40 index future provided by Euronext, we are able to quantify market participants contributions to the volatility in the diffusive limit. To achieve this result, we leverage the branching properties of Hawkes point processes. We find that fast intermediaries (e.g. market maker type agents) have a smaller footprint on the volatility than slower, directional agents. The branching structure of Hawkes processes allows us to examine also the degree of endogeneity of each agent behavior, and we find that high-frequency traders are more endogenously driven than other types of agents.

Suggested Citation

  • Marcello Rambaldi & Emmanuel Bacry & Jean-François Muzy, 2019. "Disentangling and quantifying market participant volatility contributions," Quantitative Finance, Taylor & Francis Journals, vol. 19(10), pages 1613-1625, October.
    • Handle: RePEc:taf:quantf:v:19:y:2019:i:10:p:1613-1625
    DOI: 10.1080/14697688.2019.1591631
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    Cited by:

    1. Jianfei Zhang & Mathieu Rosenbaum, 2023. "Towards systematic intraday news screening: a liquidity-focused approach," Papers 2304.05115, arXiv.org.
    2. A E Clements & A S Hurn & K A Lindsay & V Volkov, 2023. "Estimating a Non-parametric Memory Kernel for Mutually Exciting Point Processes," Journal of Financial Econometrics, Oxford University Press, vol. 21(5), pages 1759-1790.
    3. Wu, Peng & Muzy, Jean-François & Bacry, Emmanuel, 2022. "From rough to multifractal volatility: The log S-fBM model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 604(C).

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