Given a stationary point process, an intensity burst is defined as a short time period during which the number of counts is larger than the typical count rate. It might signal a local nonstationarity or the presence of an external perturbation to the system. In this paper we propose a procedure for the detection of intensity bursts within the Hawkes process framework. By using a model selection scheme we show that our procedure can be used to detect intensity bursts when both their occurrence time and their total number is unknown. Moreover, the initial time of the burst can be determined with a precision given by the typical interevent time. We apply our methodology to the midprice change in foreign exchange (FX) markets showing that these bursts are frequent and that only a relatively small fraction is associated with news arrival. We show lead-lag relations in intensity burst occurrence across different FX rates and we discuss their relation with price jumps.

Detection of intensity bursts using Hawkes processes: An application to high-frequency financial data

Lillo, Fabrizio
2018

Abstract

Given a stationary point process, an intensity burst is defined as a short time period during which the number of counts is larger than the typical count rate. It might signal a local nonstationarity or the presence of an external perturbation to the system. In this paper we propose a procedure for the detection of intensity bursts within the Hawkes process framework. By using a model selection scheme we show that our procedure can be used to detect intensity bursts when both their occurrence time and their total number is unknown. Moreover, the initial time of the burst can be determined with a precision given by the typical interevent time. We apply our methodology to the midprice change in foreign exchange (FX) markets showing that these bursts are frequent and that only a relatively small fraction is associated with news arrival. We show lead-lag relations in intensity burst occurrence across different FX rates and we discuss their relation with price jumps.
2018
Statistical and Nonlinear Physics; Statistics and Probability; Condensed Matter Physics
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11384/83602
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