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Modelling systemic price cojumps with Hawkes factor models

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

Instabilities in the price dynamics of a large number of financial assets are a clear sign of systemic events. By investigating a set of 20 high cap stocks traded at the Italian Stock Exchange, we find that there is 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.

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File URL: http://arxiv.org/pdf/1301.6141
File Function: Latest version
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Paper provided by arXiv.org in its series Papers with number 1301.6141.

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Date of creation: Jan 2013
Date of revision: Mar 2013
Handle: RePEc:arx:papers:1301.6141
Contact details of provider: Web page: http://arxiv.org/

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  1. Clive G. Bowsher, 2003. "Modelling Security Market Events in Continuous Time: Intensity Based, Multivariate Point Process Models," Economics Papers 2003-W03, Economics Group, Nuffield College, University of Oxford.
  2. Mardi Dungey & Michael McKenzie & Vanessa Smith, 2007. "Empirical Evidence On Jumps In The Term Structure Of The Us Treasury Market," CAMA Working Papers 2007-25, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. John M. Maheu & Thomas H. McCurdy, 2004. "News Arrival, Jump Dynamics, and Volatility Components for Individual Stock Returns," Journal of Finance, American Finance Association, vol. 59(2), pages 755-793, 04.
  4. Mardi Dungey & Lyudmyla Hvozdyk, 2010. "Cojumping: Evidence from the US Treasury Bond and Futures Markets," NCER Working Paper Series 56, National Centre for Econometric Research, revised 20 Jul 2010.
  5. Aït-Sahalia, Yacine & Cacho-Diaz, Julio & Laeven, Roger J.A., 2015. "Modeling financial contagion using mutually exciting jump processes," Journal of Financial Economics, Elsevier, vol. 117(3), pages 585-606.
  6. E. Bacry & S. Delattre & M. Hoffmann & J. F. Muzy, 2013. "Modelling microstructure noise with mutually exciting point processes," Quantitative Finance, Taylor & Francis Journals, vol. 13(1), pages 65-77, January.
  7. Fulvio Corsi & Davide Pirino & Roberto Reno', 2010. "Threshold Bipower Variation and the Impact of Jumps on Volatility Forecasting," LEM Papers Series 2010/11, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  8. Jérôme Lahaye & Sébastien Laurent & Christopher J. Neely, 2011. "Jumps, cojumps and macro announcements," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(6), pages 893-921, 09.
  9. Tim Bollerslev & Viktor Todorov, 2011. "Tails, Fears, and Risk Premia," Journal of Finance, American Finance Association, vol. 66(6), pages 2165-2211, December.
  10. Christian T. Brownlees & Giampiero Gallo, 2006. "Financial Econometric Analysis at Ultra–High Frequency: Data Handling Concerns," Econometrics Working Papers Archive wp2006_03, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
  11. Ioane Muni Toke & Fabrizio Pomponio, 2012. "Modelling Trades-Through in a Limit Order Book Using Hawkes Processes," Post-Print hal-00745554, HAL.
  12. Sanjiv Ranjan Das & Raman Uppal, 2004. "Systemic Risk and International Portfolio Choice," Journal of Finance, American Finance Association, vol. 59(6), pages 2809-2834, December.
  13. Armand Joulin & Augustin Lefevre & Daniel Grunberg & Jean-Philippe Bouchaud, 2008. "Stock price jumps: news and volume play a minor role," Papers 0803.1769, arXiv.org.
  14. Frédéric Abergel & Anirban Chakraborti & B.K. Chakrabarti & M. Mitra, 2011. "Econophysics of order-driven markets," Post-Print hal-00872396, HAL.
  15. Bjørn Eraker, 2004. "Do Stock Prices and Volatility Jump? Reconciling Evidence from Spot and Option Prices," Journal of Finance, American Finance Association, vol. 59(3), pages 1367-1404, 06.
  16. Toke, Ioane Muni & Pomponio, Fabrizio, 2012. "Modelling trades-through in a limit order book using hawkes processes," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-23.
  17. repec:hal:journl:peer-00741630 is not listed on IDEAS
  18. Jiang, George J. & Oomen, Roel C.A., 2008. "Testing for jumps when asset prices are observed with noise-a "swap variance" approach," Journal of Econometrics, Elsevier, vol. 144(2), pages 352-370, June.
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