Institute of Information Theory and Automation

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Journal Article

Do co-jumps impact correlations in currency markets?

Baruník J., Vácha Lukáš

: Journal of Financial Markets vol.37, 1 (2018), p. 97-119

: GA16-14151S, GA ČR

: Co-jumps, Currency markets, Realized covariance, Wavelets, Bootstrap

: 10.1016/j.finmar.2017.11.004


(eng): We quantify how co-jumps impact correlations in currency markets. To disentangle the continuous part of quadratic covariation from co-jumps, and study the influence of co-jumps on correlations, we propose a new wavelet-based estimator. The proposed estimation framework is able to localize the co-jumps very precisely through wavelet coefficients and identify statistically significant co-jumps. Empirical findings reveal the different behaviors of co-jumps during Asian, European, and U.S. trading sessions. Importantly, we document that co-jumps significantly influence correlation in currency markets.

: AH

: 50206

2019-01-07 08:39