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Correlation and Lead–Lag Relationships in a Hawkes Microstructure Model
Author(s) -
Da Fonseca José,
Zaatour Riadh
Publication year - 2017
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21800
Subject(s) - lag , econometrics , covariance matrix , covariance , asset (computer security) , lead–lag compensator , limit (mathematics) , relation (database) , correlation , economics , statistical physics , computer science , mathematics , statistics , physics , engineering , data mining , mathematical analysis , computer network , geometry , computer security , control engineering
The aim of this paper is to develop a multi‐asset model based on the Hawkes process describing the evolution of assets at high frequency and to study the lead–lag relationship as well as the correlation between the assets within this framework. We compute several statistical quantities and the covariance matrix associated with the diffusive limit of the model so that the relation between the parameters driving the assets at high and low frequencies is explicit. We illustrate the results using several financial assets quoted in the Eurex market and show how the model captures the lead–lag relationship between them. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 37:260–285, 2017