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Modelling systemic price cojumps with Hawkes factor models

Bormetti, G., Calcagnile, L. M., Treccani, M., Corsi, F., Marmi, S. and Lillo, F (2015). Modelling systemic price cojumps with Hawkes factor models. Quantitative Finance, 15(7), pp. 1137-1156. doi: 10.1080/14697688.2014.996586

Abstract

Instabilities in the price dynamics of a large number of financial assets are a clear sign of systemic events. By investigating portfolios of highly liquid stocks, we find that there are a large number of high-frequency cojumps. We show that the dynamics of these jumps is described neither by a multivariate Poisson nor by a multivariate Hawkes model. We introduce a Hawkes one-factor model which is able to capture simultaneously the time clustering of jumps and the high synchronization of jumps across assets.

Publication Type: Article
Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in 'Quantitative Finance 'on 13 March 2015, available online: http://www.tandfonline.com/10.1080/14697688.2014.996586.
Publisher Keywords: Cojumps, Hawkes processes, Systemic shocks, High frequency data
Departments: School of Arts & Social Sciences > Economics
URI: http://openaccess.city.ac.uk/id/eprint/19455
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