Asymptotic results for time-changed Lévy processes sampled at hitting times

DOI10.1016/J.SPA.2011.03.013MaRDI QIDQ550169zbMATHOpenAlexFDO

Authors Mathieu Rosenbaum, Peter Tankov

Publication date 8 July 2011

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

Full work available at URL https://arxiv.org/abs/1007.1414

zbMATH Keywords

central limit theoremhitting timesBlumenthal-Getoor indexstable processesovershootsstatistics of high frequency datatime-changed Lévy processes

Mathematics Subject Classification ID

Processes with independent increments; Lévy processes (60G51) Markov processes: estimation; hidden Markov models (62M05) Stable stochastic processes (60G52)

Abstract: We provide asymptotic results and develop high frequency statistical procedures for time-changed L'evy processes sampled at random instants. The sampling times are given by first hitting times of symmetric barriers whose distance with respect to the starting point is equal to $varepsilon$. This setting can be seen as a first step towards a model for tick-by-tick financial data allowing for large jumps. For a wide class of L'evy processes, we introduce a renormalization depending on $varepsilon$, under which the L'evy process converges in law to an $alpha$-stable process as $varepsilon$ goes to $0$. The convergence is extended to moments of hitting times and overshoots. In particular, these results allow us to construct consistent estimators of the time change and of the Blumenthal-Getoor index of the underlying L'evy process. Convergence rates and a central limit theorem are established under additional assumptions.

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Cited in

(14)

• Short-term asymptotics for the implied volatility skew under a stochastic volatility model with Lévy jumps
• Asymptotic behavior and calibration of short-time option prices under the normal tempered stable model
• Small-time asymptotics of stopped Lévy bridges and simulation schemes with controlled bias
• Small-maturity digital options in Lévy models: an analytic approach
• Quadratic covariation estimation of an irregularly observed semimartingale with jumps and noise
• CBI-time-changed Lévy processes
• Hitting Probabilities for Spectrally Positive Lévy Processes
• Short-time expansions for close-to-the-money options under a Lévy jump model with stochastic volatility
• Hitting times of points and intervals for symmetric Lévy processes
• Stability of overshoots of Markov additive processes
• High-order short-time expansions for ATM option prices of exponential Lévy models
• Central limit theorems for the non-parametric estimation of time-changed Lévy models
• Asymptotically optimal discretization of hedging strategies with jumps
• Small-maturity asymptotics for the at-the-money implied volatility slope in Lévy models

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