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Modelling systemic price cojumps with Hawkes factor models |
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| Authors: | Giacomo Bormetti Lucio Maria Calcagnile Fulvio Corsi Stefano Marmi Fabrizio Lillo |
| Affiliation: | 1. Scuola Normale Superiore, Piazza dei Cavalieri 7, Pisa 56126, Italy.;2. QUANTLab, via Pietrasantina 123, Pisa 56122, Italy.;3. CNRS UMI 3483 – Laboratorio Fibonacci, Piazza dei Cavalieri 7, Pisa 56126, Italy.;4. Dipartimento di Fisica e Chimica, Università degli Studi di Palermo, Viale delle Scienze Ed. 18, Palermo 90128, Italy.;5. Santa Fe Institute, 1399 Hyde Park Road, Santa Fe, NM 87501, USA. |
| 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. |
| Keywords: | Cojumps Hawkes processes Systemic shocks High frequency data |