Journal
QUANTITATIVE FINANCE
Volume 15, Issue 7, Pages 1137-1156Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/14697688.2014.996586
Keywords
C32; C5; G01; G10; C51; Systemic shocks; Hawkes processes; Cojumps; High frequency data
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Funding
- Scuola Normale Superiore grant [GR12CALCAG]
- European Union [CRISIS-ICT-2011-288501]
- [SNS11LILLB]
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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.
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