Fourier transform methods for pathwise covariance estimation in the presence of jumps

DOI10.1016/J.SPA.2014.07.023MaRDI QIDQ468730zbMATH OpenOpenAlexFDO

Authors Christa Cuchiero, Josef Teichmann

Publication date 7 November 2014

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

Full work available at URL https://arxiv.org/abs/1301.3602

zbMATH Keywords

consistencycentral limit theoremFourier analysisjump-diffusionjump-robust estimationnon-parametric spot variance estimation

Mathematics Subject Classification ID

Nonparametric estimation (62G05) Asymptotic properties of nonparametric inference (62G20) Statistical methods; risk measures (91G70) Central limit and other weak theorems (60F05) Diffusion processes (60J60) Generalizations of martingales (60G48) Fourier and Fourier-Stieltjes transforms and other transforms of Fourier type (42A38)

Abstract: We provide a new non-parametric Fourier procedure to estimate the trajectory of the instantaneous covariance process (from discrete observations of a multidimensional price process) in the presence of jumps extending the seminal work Malliavin and Mancino~cite{MM:02, MM:09}. Our approach relies on a modification of (classical) jump-robust estimators of integrated realized covariance to estimate the Fourier coefficients of the covariance trajectory. Using Fourier-F'ejer inversion we reconstruct the path of the instantaneous covariance. We prove consistency and central limit theorem (CLT) and in particular that the asymptotic estimator variance is smaller by a factor $2/3$ in comparison to classical local estimators. The procedure is robust enough to allow for an iteration and we can show theoretically and empirically how to estimate the integrated realized covariance of the instantaneous stochastic covariance process. We apply these techniques to robust calibration problems for multivariate modeling in finance, i.e., the selection of a pricing measure by using time series and derivatives' price information simultaneously.

Recommendations

• A Fourier transform method for nonparametric estimation of multivariate volatility
• Harmonic Analysis Methods for Nonparametric Estimation of Volatility: Theory and Applications
• On estimating the integrated co-volatility using noisy high-frequency data with jumps
• ESTIMATION OF INTEGRATED COVARIANCES IN THE SIMULTANEOUS PRESENCE OF NONSYNCHRONICITY, MICROSTRUCTURE NOISE AND JUMPS
• IDENTIFYING THE BROWNIAN COVARIATION FROM THE CO-JUMPS GIVEN DISCRETE OBSERVATIONS

Cites work

• scientific article; zbMATH DE number 4048298 (Why is no real title available?)
• scientific article; zbMATH DE number 219861 (Why is no real title available?)
• scientific article; zbMATH DE number 1834045 (Why is no real title available?)
• A Fourier transform method for nonparametric estimation of multivariate volatility
• A central limit theorem for realised power and bipower variation of continuous semimartingales
• A multifactor volatility Heston model
• Absolute moments in 2-dimensional normal distribution
• Affine processes on positive semidefinite matrices
• Asymptotic equivalence for nonparametric regression with multivariate and random design
• Asymptotic properties of realized power variations and related functionals of semimartingales
• Classes de saturation de certains procédés d'approximation des séries de Fourier des fonctions continues et applications à quelques problèmes d'approximation
• Computation of volatility in stochastic volatility models with high frequency data
• Discretization of processes.
• Estimation of correlation for continuous semimartingales
• Estimation of the instantaneous volatility
• Estimation of volatility functionals in the simultaneous presence of microstructure noise and jumps
• Fourier series method for measurement of multivariate volatilities
• Inference for volatility-type objects and implications for hedging
• Limit theorems for multipower variation in the presence of jumps
• New theory of estimation of integrated volatility with applications.
• Non-parametric threshold estimation for models with stochastic diffusion coefficient and jumps
• Nonparametric filtering of the realized spot volatility: a kernel-based approach
• Power and multipower variation: inference for high frequency data
• Power variation and stochastic volatility: a review and some new results
• Spot volatility estimation for high-frequency data
• Stein estimation for the drift of Gaussian processes using the Malliavin calculus
• The estimation of leverage effect with high-frequency data
• The realized Laplace transform of volatility
• The speed of convergence of the threshold estimator of integrated variance

Cited in

(11)

• Signature-Based Models: Theory and Calibration
• Bias-optimal vol-of-vol estimation: the role of window overlapping
• Long versus short time scales: the rough dilemma and beyond
• Estimation of volatility in a high-frequency setting: a short review
• Bayesian approach for parameter estimation of continuous-time stochastic volatility models using Fourier transform methods
• Is the variance swap rate affine in the spot variance? Evidence from S\&P500 data
• Asymptotic results for the Fourier estimator of the integrated quarticity
• Discrete time term structure theory and consistent recalibration models
• Estimation of the stochastic leverage effect using the Fourier transform method
• Malliavin-Mancino estimators implemented with nonuniform fast Fourier transforms
• High-frequency volatility of volatility estimation free from spot volatility estimates

This page was built for publication: Fourier transform methods for pathwise covariance estimation in the presence of jumps

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q468730)