St.Petersburg Economic seminar (HSE, EU, PDMI) on October, 15: Evgenii Vladimirov (University of Amsterdam)
Topic: Jump Contagion among Stock Market Indices: Evidence from Option Markets
Date & Time: October, 15; 18:00 - 19:00
Time: 18:00 - 19:00
Abstract: This paper proposes a multivariate option pricing model with a mutually exciting jump component, also known as a multivariate Hawkes process, inducing time-series clustering of jumps in single markets and cross-sectional jump contagion among multiple markets. We formulate our model under both the physical and risk-neutral probability measures in an international context to jointly exploit information from the time series of stock market indices and their option price panels. For this model, we develop a semi-parametric estimation procedure based on the implied-state generalized method of moments employing a continuum of moment conditions obtained from the characteristic function of the state vector. We design a partial-information setting that allows us to reduce the computational burden arising in the multivariate set-up. Furthermore, we derive the asymptotic properties of our estimators and discuss in detail the calculation of the standard errors. Finally, we apply the univariate and bivariate versions of our model to a rich panel of high-frequency information on the FTSE 100 and DAX 30 stock market indices. Our findings suggest the presence of self-excitation effects in both indices and asymmetric jump contagion driven by the UK market.
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