Modeling market activity using 1D non-homogeneous Hawkes Processes

Sammanfattning: This paper can be seen as a light introduction to the study of Hawkes pro- cesses and their applicability in the realms of finance. In particular, this paper is concerned on the topic of modeling market activity and elaborates on how Hawkes processes are superior to non-homogeneous Poisson processes in this re- gard. After some rudimentary theory on point processes it goes more in depth into the above mentioned processes and their likelihood estimators. The rest of the paper is dedicated to the actual modeling procedure, its necessary prepa- rations and results, delving into the possible real-world interpretations of what the modeling tells us.