Multivariate quadratic Hawkes processes—part I: theoretical analysis
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Publication:6158435
DOI10.1080/14697688.2023.2178322zbMATH Open1519.91235arXiv2206.10419MaRDI QIDQ6158435FDOQ6158435
Authors: Michael Benzaquen, Jean-Philippe Bouchaud 
Publication date: 20 June 2023
Published in: Quantitative Finance (Search for Journal in Brave)
Abstract: Quadratic Hawkes (QHawkes) processes have proved effective at reproducing the statistics of price changes, capturing many of the stylised facts of financial markets. Motivated by the recently reported strong occurrence of endogenous co-jumps (simultaneous price jumps of several assets) we extend QHawkes to a multivariate framework (MQHawkes), that is considering several financial assets and their interactions. Assuming that quadratic kernels write as the sum of a time-diagonal component and a rank one (trend) contribution, we investigate endogeneity ratios and the resulting stationarity conditions. We then derive the so-called Yule-Walker equations relating covariances and feedback kernels, which are essential to calibrate the MQHawkes process on empirical data. Finally, we investigate the volatility distribution of the process and find that, as in the univariate case, it exhibits power-law behavior, with an exponent that can be exactly computed in some limiting cases.
Full work available at URL: https://arxiv.org/abs/2206.10419
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Cited In (11)
- Testing the causality of Hawkes processes with time reversal
- Some limit theorems for Hawkes processes and application to financial statistics
- Multivariate Hawkes processes: an application to financial data
- Simultaneous multivariate Hawkes-type point processes and their application to financial markets
- Modelling systemic price cojumps with Hawkes factor models
- Multivariate Hawkes process allowing for common shocks
- Collective synchronization and high frequency systemic instabilities in financial markets
- Classification of flash crashes using the Hawkes \(p,q\) framework
- The endo-exo problem in high frequency financial price fluctuations and rejecting criticality
- Quadratic Hawkes processes for financial prices
- On the cumulant transforms for Hawkes processes
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