title: Modeling foreign exchange market activity around macroeconomic news: Hawkes-process approach.
abstract: 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.
authors: Scuola Normale Superiore, Piazza dei Cavalieri 7, Pisa 56126, Italy.
authors: Marcello
authors: M
authors: Rambaldi
authors: eFX Quantitative Trading, HSBC Bank, 8 Canada Square, London E14 5HQ, United Kingdom.
authors: Paris
authors: P
authors: Pennesi
authors: Scuola Normale Superiore, Piazza dei Cavalieri 7, Pisa 56126, Italy and Dipartimento di Fisica e Chimica, Università degli Studi di Palermo, Viale delle Scienze Ed. 18, Palermo 90128, Italy and Santa Fe Institute, 1399 Hyde Park Road, Santa Fe, New Mexico 87501, USA.
authors: Fabrizio
authors: F
authors: Lillo