PhD defence F. (Francine) Gresnigt
- Prof.dr. P.H.B.F. Franses
- Dr. H.J.W.G. Kole
On Thursday 20 February 2020, F. Gresnigt will defend her PhD dissertation, entitled: ‘Identifying and Predicting Financial Earthquakes Using Hawkes Processes’.
This dissertation attempts to identify and predict earthquakes in the financial market (financial crashes) using Hawkes processes. Models based on Hawkes processes were first used in the earthquake literature. The dissertation shows Hawkes processes also match investors' self-exciting herding behavior around crashes, which has similar characteristics to the self-exciting behavior of seismic activity around earthquakes. In Chapter 2 an Early Warning System based on Hawkes models is developed that indicates the arrival of a crash within a trading week. EWS based Hawkes model outperform EWS based on well-known and commonly used volatility models, proving that these models do not capture all information that can be used to predict crashes. Specification tests for Hawkes models with a specific focus on testing for cross-excitation, are designed in Chapter 3. Chapter 3 as well as Chapter 4, indicate that shocks in one financial market affect the occurrence (and magnitude) of shocks in other financial markets. Moreover, comparing predictions of models with and without cross-excitation, more accurate predictions are obtained including cross-excitation. The last Chapter (Chapter 5) develops methods to estimate non-affine Hawkes models using the information in option prices with the aid of Machine Learning techniques.
The public defence will take place at the Senatehall, 1st floor of the Erasmus Building, Campus Woudestein. The ceremony will begin exactly at 15.30 hrs. In light of the solemn nature of the ceremony, we recommend that you do not take children under the age of 6 to the first part of the ceremony.