Structural Hawkes Ambiguity in Near-Critical Market Making

This paper studies a narrow source of model risk in market making: uncertainty about the self-excitation structure of Hawkes order flow. The structure is encoded by a branching matrix Gamma, while the distance to instability is measured by the Perron root rho(Gamma). In a reduced robust inventory model, ambiguity in Gamma is amplified through the Hawkes resolvent (I - Gamma)^(-1), so near-critical calibration error can become an economic risk premium. The critical exponent depends on normalization: relative critical-slack ambiguity gives a square-law reduced premium, while absolute branching-matrix ambiguity contributes one additional derivative factor when epsilon = o(1 - rho). The paper gives a reduced-form spectral theorem and conditional robust-control bridges under stated compact-PDMP, Lyapunov, weighted-comparison, and smooth-interior assumptions. It then evaluates robust and nominal quoting policies under common random numbers, Ogata event times, public LOBSTER sample replays, Binance aggregate trades, and crypto order-book samples. The empirical claim is deliberately limited: structural Hawkes ambiguity is visible in these near-critical stress tests, but public Hawkes calibrations remain diagnostic inputs rather than complete execution models.

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Publication Details

Journal
Zenodo (CERN European Organization for Nuclear Research)
Published
2026-05-22
DOI
https://doi.org/10.5281/zenodo.20341461
Primary Topic
Point processes and geometric inequalities
Type
preprint
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preprint

Structural Hawkes Ambiguity in Near-Critical Market Making

Mayank Sharma, Rohit Kumar Mourya
Zenodo (CERN European Organization for Nuclear Research)
Point processes and geometric inequalities
preprint

Structural Hawkes Ambiguity in Near-Critical Market Making

Mayank Sharma, Rohit Kumar Mourya
preprint en

Abstract

This paper studies a narrow source of model risk in market making: uncertainty about the self-excitation structure of Hawkes order flow. The structure is encoded by a branching matrix Gamma, while the distance to instability is measured by the Perron root rho(Gamma). In a reduced robust inventory model, ambiguity in Gamma is amplified through the Hawkes resolvent (I - Gamma)^(-1), so near-critical calibration error can become an economic risk premium. The critical exponent depends on normalization: relative critical-slack ambiguity gives a square-law reduced premium, while absolute branching-matrix ambiguity contributes one additional derivative factor when epsilon = o(1 - rho). The paper gives a reduced-form spectral theorem and conditional robust-control bridges under stated compact-PDMP, Lyapunov, weighted-comparison, and smooth-interior assumptions. It then evaluates robust and nominal quoting policies under common random numbers, Ogata event times, public LOBSTER sample replays, Binance aggregate trades, and crypto order-book samples. The empirical claim is deliberately limited: structural Hawkes ambiguity is visible in these near-critical stress tests, but public Hawkes calibrations remain diagnostic inputs rather than complete execution models.

Zenodo (CERN European Organization for Nuclear Research)
Indian Institute of Technology Jodhpur (IN)
Point processes and geometric inequalities
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