Unbiased truncated quadratic variation for volatility estimation in jump diffusion processes

DOI10.1016/J.SPA.2020.04.010MaRDI QIDQ2196535zbMATH OpenOpenAlexFDO

Authors Chiara Amorino, Arnaud Gloter

Publication date 3 September 2020

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1904.10660

zbMATH Keywords

convergence speedhigh frequency dataintegrated varianceLévy-driven SDEthreshold estimator

Mathematics Subject Classification ID

Functional limit theorems; invariance principles (60F17) Generalizations of martingales (60G48) Applications of stochastic analysis (to PDEs, etc.) (60H30) Diffusion processes (60J60) Jump processes on general state spaces (60J76) Asymptotic properties of parametric estimators (62F12)

Abstract: The problem of integrated volatility estimation for the solution X of a stochastic differential equation with L{'e}vy-type jumps is considered under discrete high-frequency observations in both short and long time horizon. We provide an asymptotic expansion for the integrated volatility that gives us, in detail, the contribution deriving from the jump part. The knowledge of such a contribution allows us to build an unbiased version of the truncated quadratic variation, in which the bias is visibly reduced. In earlier results the condition $$ > 1 2(2--$alpha$) on $$ (that is such that (1/n) $$ is the threshold of the truncated quadratic variation) and on the degree of jump activity $alpha$ was needed to have the original truncated realized volatility well-performed (see [22], [13]). In this paper we theoretically relax this condition and we show that our unbiased estimator achieves excellent numerical results for any couple ($alpha$, $$). L{'e}vy-driven SDE, integrated variance, threshold estimator, convergence speed, high frequency data.

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Cited in

(8)

• Joint estimation for volatility and drift parameters of ergodic jump diffusion processes via contrast function
• Rate of estimation for the stationary distribution of jump-processes over anisotropic Hölder classes
• On the nonparametric inference of coefficients of self-exciting jump-diffusion
• Estimation of state-dependent jump activity and drift for Markovian semimartingales
• Rate-optimal estimation of the Blumenthal-Getoor index of a Lévy process
• Inference of binary regime models with jump discontinuities
• Efficient integrated volatility estimation in the presence of infinite variation jumps via debiased truncated realized variations
• Probabilistic models and statistics for electronic financial markets in the digital age

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