Investigating Short-Term Dynamics in Green Bond Markets
ArXiv ID: 2308.12179 “View on arXiv”
Authors: Unknown
Abstract
The paper investigates the effect of the label green in bond markets from the lens of the trading activity. The idea is that jumps in the dynamics of returns have a specific memory nature that can be well represented through a self-exciting process. Specifically, using Hawkes processes where the intensity is described through a continuous time moving average model, we study the high-frequency dynamics of bond prices. We also introduce a bivariate extension of the model that deals with the cross-effect of upward and downward price movements. Empirical results suggest that differences emerge if we consider periods with relevant interest rate announcements, especially in the case of an issuer operating in the energy market.
Keywords: Hawkes Processes, Bond Markets, Self-exciting Processes, High-Frequency Dynamics, Green Bonds
Complexity vs Empirical Score
- Math Complexity: 8.5/10
- Empirical Rigor: 6.0/10
- Quadrant: Holy Grail
- Why: The paper employs advanced stochastic calculus and CARMA(p,q)-Hawkes processes with extensive LaTeX derivations, indicating high mathematical complexity. It demonstrates empirical rigor by using high-frequency tick data, applying the Lee-Mykland jump test, and analyzing real market periods with specific issuers (Engie SA, Crédit Agricole) and ECB announcements.
flowchart TD
A["Research Goal<br>Investigate effect of 'green' label<br>on bond market dynamics"] --> B["Data Input<br>High-frequency bond price data<br>including energy market issuer"]
B --> C["Methodology<br>Hawkes Process with<br>Moving Average Intensity"]
C --> D["Computational Model<br>Bivariate extension for<br>upward/downward price movements"]
D --> E["Key Findings<br>Distinct jump memory dynamics<br>especially during interest rate announcements<br>for energy sector green bonds"]