Self-exciting jump processes and their asymptotic behaviour

Abstract

The purpose of this paper is to investigate properties of self-exciting jump processes. We derive the Laplace transform of SDE driven self-exciting processes with independent, identically distributed jump sizes. By using this Laplace transform, we find a recursive formula for the moments of the self-exciting process. The formula for the moments allow us to derive expressions for the expectation and variance of the self-exciting process. We show that self-exciting processes can exhibit both finite and infinite activity behaviour. Furthermore, we show that the scaling limit of the intensity process equals the strong solution of the square-root diffusion process(Cox-Ingersoll-Ross process) in distribution. As a particular example, we study the case of a linear intensity process and derive explicit expressions for the expectation and variance in this case.