On May 13, 2024, Faculty of Finance at City University of Macau organized the sixteenth Finance Salon (2023-2024) at the Taipa campus. The salon was delivered by Associate Professor Zhang Changyong from Curtin University, Malaysia. His research paper titled "Hawkes-Based Models for Order Book Dynamics". In financial markets, price dynamics are driven by the interaction of buy and sell orders. Nowadays, an increasing number of stock exchanges are organized as order-driven markets, where orders are aggregated in limit order books. To more accurately capture the microstructure and properties related to extreme order books, such as time-varying intensity and self-excitation, the paper first introduces two Hawkes-based dynamic models for order books—one with an exponential kernel and the other with a power-law model kernel. These models are then algorithmically processed, and their goodness of fit is compared with the original data in terms of computational time for maximum likelihood estimation. Several quantitative indicators are proposed to measure the goodness of fit. The test results indicate that the Hawkes process with a slowly decaying kernel can more accurately represent the jump intensity in price processes. Therefore, this finding suggests that the long-memory properties of Hawkes processes with a power-law kernel and their implied self-excitation phenomena can serve as realistic models for order dynamics at the microstructure level.

Associate professor Zhang is currently teaching in Department of Accounting, Finance and Economics at Curtin University, Malaysia. His research focuses on financial economics, operations research, and stochastic analysis. He has published articles in journals such as Applied Economics, Resources Policy, and Renewable Energy.

During this Finance Salon, Professor Zhang engaged in in-depth discussions with faculty and students from the Faculty of Finance, broadening the academic perspectives of us. The Finance Salon organized by Faculty of Finance at City University of Macau serves as a platform for exchanging academic ideas and fostering academic awareness. With finance as the main focus, we invite senior scholars/experts from academia and the financial industry to engage in research discussions on cutting-edge topics and share industry development trends, aiming to provide a fresh academic experience and thinking model for CityU students and members of the faculty. Through activities like the Finance Salon, we hope to offer graduate students a better academic platform, encouraging further exploration and research on academic issues.