Riding Wavelets: A Method to Discover New Classes of Price Jumps

Cecilia Aubrun, Rudy Morel, Michael Benzaquen and Jean-Philippe Bouchaud

Papers from arXiv.org

Abstract: Cascades of events and extreme occurrences have garnered significant attention across diverse domains such as financial markets, seismology, and social physics. Such events can stem either from the internal dynamics inherent to the system (endogenous), or from external shocks (exogenous). The possibility of separating these two classes of events has critical implications for professionals in those fields. We introduce an unsupervised framework leveraging a representation of jump time-series based on wavelet coefficients and apply it to stock price jumps. In line with previous work, we recover the fact that the time-asymmetry of volatility is a major feature. Mean-reversion and trend are found to be two additional key features, allowing us to identify new classes of jumps. Furthermore, thanks to our wavelet-based representation, we investigate the reflexive properties of co-jumps, which occur when multiple stocks experience price jumps within the same minute. We argue that a significant fraction of co-jumps results from an endogenous contagion mechanism.

Date: 2024-04
New Economics Papers: this item is included in nep-mst
References: Add references at CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2404.16467 Latest 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:arx:papers:2404.16467

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().