Inference for the jump part of quadratic variation of Itô semimartingales

Almut Veraart ()

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: Recent research has focused on modelling asset prices by Itô semimartingales. In such a modelling framework, the quadratic variation consists of a continuous and a jump component. This paper is about inference on the jump part of the quadratic variation, which can be estimated by the difference of realised variance and realised multipower variation. The main contribution of this paper is twofold. First, it provides a bivariate asymptotic limit theory for realised variance and realised multipower variation in the presence of jumps. Second, this paper presents new, consistent estimators for the jump part of the asymptotic variance of the estimation bias. Eventually, this leads to a feasible asymptotic theory which is applicable in practice. Finally, Monte Carlo studies reveal a good finite sample performance of the proposed feasible limit theory.

Keywords: Quadratic variation; Itô semimartingale; stochastic volatility; jumps; realised variance; realised multipower variation; high–frequency data (search for similar items in EconPapers)
JEL-codes: C13 C14 G10 G12 (search for similar items in EconPapers)
Pages: 37
Date: 2008-03-31
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mst
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https://repec.econ.au.dk/repec/creates/rp/08/rp08_17.pdf (application/pdf)

Related works:
Journal Article: INFERENCE FOR THE JUMP PART OF QUADRATIC VARIATION OF ITÔ SEMIMARTINGALES (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2008-17

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