6533b7cffe1ef96bd12585f6
RESEARCH PRODUCT
Modeling foreign exchange market activity around macroeconomic news: Hawkes-process approach
Marcello RambaldiFabrizio LilloParis Pennesisubject
news arrivalTime windowsforeign exchange marketHawkes processehigh frequency financeEconomicsMonetary economicsVolatility (finance)Time seriesForeign exchange marketComputingMilieux_MISCELLANEOUSdescription
We present a Hawkes-model approach to the foreign exchange market in which the high-frequency price dynamics is affected by a self-exciting mechanism and an exogenous component, generated by the pre-announced arrival of macroeconomic news. By focusing on time windows around the news announcement, we find that the model is able to capture the increase of trading activity after the news, both when the news has a sizable effect on volatility and when this effect is negligible, either because the news in not important or because the announcement is in line with the forecast by analysts. We extend the model by considering noncausal effects, due to the fact that the existence of the news (but not its content) is known by the market before the announcement.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2015-01-01 |