Modelling systemic price cojumps with Hawkes factor models

Giacomo Bormetti, Lucio Maria Calcagnile, Michele Treccani, Fulvio Corsi, Stefano Marmi and Fabrizio Lillo

Quantitative Finance, 2015, vol. 15, issue 7, 1137-1156

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.

Date: 2015
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Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:taf:quantf:v:15:y:2015:i:7:p:1137-1156

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DOI: 10.1080/14697688.2014.996586

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