Limit theorems for the empirical distribution function of scaled increments of Itô semimartingales at high frequencies

DOI10.1214/13-AAP965zbMATH Open1429.62371OpenAlexW3102930492MaRDI QIDQ744376FDOQ744376

Authors Viktor Todorov, George Tauchen

Publication date 25 September 2014

Published in The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1407.0518

zbMATH Keywords

jumpsstochastic volatilityhigh-frequency dataKolmogorov-Smirnov teststable processItô semimartingale

Mathematics Subject Classification ID

Nonparametric hypothesis testing (62G10) Asymptotic properties of nonparametric inference (62G20) Markov processes: estimation; hidden Markov models (62M05) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10)

Abstract: We derive limit theorems for the empirical distribution function of "devolatilized" increments of an It^{o} semimartingale observed at high frequencies. These "devolatilized" increments are formed by suitably rescaling and truncating the raw increments to remove the effects of stochastic volatility and "large" jumps. We derive the limit of the empirical c.d.f. of the adjusted increments for any It^{o} semimartingale whose dominant component at high frequencies has activity index of $$, where $$ corresponds to diffusion. We further derive an associated CLT in the jump-diffusion case. We use the developed limit theory to construct a feasible and pivotal test for the class of It^{o} semimartingales with nonvanishing diffusion coefficient against It^{o} semimartingales with no diffusion component.

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Cited in

(15)

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• Jump activity estimation for pure-jump semimartingales via self-normalized statistics
• Inference for local distributions at high sampling frequencies: a bootstrap approach
• Variation-based tests for volatility misspecification
• Testing for pure-jump processes for high-frequency data
• Weak convergence of the empirical truncated distribution function of the Lévy measure of an Itō semimartingale
• PELVE: probability equivalent level of VaR and ES
• The fine structure of equity-index option dynamics
• Limit theorems for integrated local empirical characteristic exponents from noisy high-frequency data with application to volatility and jump activity estimation
• High-frequency asymptotics for path-dependent functionals of Itô semimartingales
• Trading-flow assisted estimation of the jump activity index
• Nonparametric estimation of jump diffusion models

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