Warnings about future jumps: properties of the exponential Hawkes model

Rachele Foschi (), Francesca Lilla () and Cecilia Mancini ()
Additional contact information
Rachele Foschi: Università di Pisa
Francesca Lilla: Banca d'Italia
Cecilia Mancini: Department of Economics (University of Verona)

No 13/2020, Working Papers from University of Verona, Department of Economics

Abstract: Having observed a cluster of jumps produced by an exponential Hawkes process, we study and quantify the residual length of the cluster. We then formalize the stochastic increasingness property of the durations between two consecutive jumps, which strengthens their positive correlation. Finally we consider the case where the process is only observed discretely and provide bounds for the probability of observing a given number of consecutive jumps. As an empirical exercise, we apply our results to a record of JPM's asset prices. First, we show that the identified jumps display dependence and clustering behavior. Second, we find that, under the exponential Hawkes model delivering the best QQ-plot, our formulas indicate a very high probability that an observed cluster of more than 1 jump did not exhaust yet.

Keywords: clusters of jumps; exponential Hawkes process; residual length of a cluster; conditional probability of a configuration of jumps; financial assets returns; truncation (search for similar items in EconPapers)
JEL-codes: C02 C52 C58 (search for similar items in EconPapers)
Pages: 53
Date: 2020-06
New Economics Papers: this item is included in nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Submitted for publication on a review

Downloads: (external link)
http://dse.univr.it/home/workingpapers/wp2020n13.pdf Revised version (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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:ver:wpaper:13/2020

Access Statistics for this paper

More papers in Working Papers from University of Verona, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Michael Reiter ().