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Inference Of Self-Exciting Jumps In Prices And Volatility Using High-Frequency Measures, Worapree Ole Maneesoonthorn, Catherine S. Forbes, Gael M. Martin
Inference Of Self-Exciting Jumps In Prices And Volatility Using High-Frequency Measures, Worapree Ole Maneesoonthorn, Catherine S. Forbes, Gael M. Martin
Worapree Ole Maneesoonthorn
Dynamic jumps in the price and volatility of an asset are modelled using a joint Hawkes process in conjunction with a bivariate jump diffusion. A state space representation is used to link observed returns, plus nonparametric measures of integrated volatility and price jumps, to the specified model components; with Bayesian inference conducted using a Markov chain Monte Carlo algorithm. An evaluation of marginal likelihoods for the proposed model relative to a large number of alternative models, including some that have featured in the literature, is provided. An extensive empirical investigation is undertaken using data on the S&P500 market index over …