A0559
Title: A SVJJ model based on a compound CARMA(p,q)-Hawkes process
Authors: Lorenzo Mercuri - University of Milan (Italy)
Andrea Perchiazzo - University of Milan (Italy) [presenting]
Edit Rroji - Universita' degli studi di Milano-Bicocca (Italy)
Abstract: A stochastic volatility model is introduced with correlated jumps, incorporating a self-exciting effect in the intensity dynamics. As a primary goal, a pricing formula is derived based on the compound CARMA(p,q)-Hawkes framework, where the stochastic volatility is influenced by the quadratic variation of the counting process in the log-price dynamics. Additionally, a simulation algorithm is constructed for the jump term founded on the thinning algorithm. This algorithm is rooted in the existence of a Hawkes intensity with an exponential kernel, which serves as an upper bound for the CARMA(p,q)-Hawkes intensity. Finally, numerical and empirical analyses are presented.
