Academic Papers

Branching ratio approximation for the self-exciting Hawkes process

We introduce a model independent approximation for the branching ratio of Hawkes self-exciting point processes.

Our estimator requires knowing only the mean and variance of the event count in a sufficiently large time window, statistics that are readily obtained from empirical data. The method we propose greatly simplifies the process of Hawkes branching ratio estimation, proposed as a proxy for market endogeneity in recent publications and formerly estimated using numerical maximisation of likelihood. We employ this method to support recent theoretical and experimental results indicating that the best fitting Hawkes model to describe S&P futures price changes is in fact critical (now and in the recent past) in light of the long memory of financial market activity.