Asymptotic results for the Fourier estimator of the integrated quarticity (Q2292050)

The authors consider the logarithmic price process, which is observed over a fixed time period \([0,T]\), with \(T<\infty\). The price process is an Itô process with the drift and volatility coefficients that are, in turn, adapted and integrable stochastic processes. The main goal of the paper is to apply Fourier analysis in order to estimate integrated fourth power of the volatility. It is also called integrated quarticity or, simply, quarticity. A central limit theorem for an estimator of the integrated quarticity based on Fourier analysis, is established. A consistency result is also derived, together with the rate of convergence. The optimal variance is obtained, with a suitable choice of the number of frequencies employed to compute the Fourier coefficients of the volatility, while the limiting distribution has a bias. Numerical results illustrate well the obtained theorems.