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Modelling systemic price cojumps with Hawkes factor models

Author

Listed:
  • Giacomo Bormetti
  • Lucio Maria Calcagnile
  • Michele Treccani
  • Fulvio Corsi
  • Stefano Marmi
  • Fabrizio Lillo

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.

Suggested Citation

  • Giacomo Bormetti & Lucio Maria Calcagnile & Michele Treccani & Fulvio Corsi & Stefano Marmi & Fabrizio Lillo, 2015. "Modelling systemic price cojumps with Hawkes factor models," Quantitative Finance, Taylor & Francis Journals, vol. 15(7), pages 1137-1156, July.
    • Handle: RePEc:taf:quantf:v:15:y:2015:i:7:p:1137-1156
    DOI: 10.1080/14697688.2014.996586
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    References listed on IDEAS

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