Exact simulation of Hawkes process with exponentially decaying intensity

Angelos Dassios and Hongbiao Zhao

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We introduce a numerically efficient simulation algorithm for Hawkes process with exponentially decaying intensity, a special case of general Hawkes process that is most widely implemented in practice. This computational method is able to exactly generate the point process and intensity process, by sampling interarrival-times directly via the underlying analytic distribution functions without numerical inverse, and hence avoids simulating intensity paths and introducing discretisation bias. Moreover, it is flexible to generate points with either stationary or non-stationary intensity, starting from any arbitrary time with any arbitrary initial intensity. It is also straightforward to implement, and can easily extend to multi-dimensional versions, for further applications in modelling contagion risk or clustering arrival of events in finance, insurance, economics and many other fields. Simulation algorithms for one dimension and multi-dimension are represented, with numerical examples of univariate and bivariate processes provided as illustrations.

JEL-codes: C1 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-cmp and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Published in Electronic Communications in Probability, July, 2013, 18(62). ISSN: 1083-589X

Downloads: (external link)
http://eprints.lse.ac.uk/51370/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:51370

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().