Impact of time–inhomogeneous jumps and leverage type effects on returns and realised variances
Abstract
This paper studies the effect of time–inhomogeneous jumps and leverage type effects on realised variance calculations when the logarithmic asset price is given by a Lévy–driven stochastic volatility model. In such a model, the realised variance is an inconsistent estimator of the integrated variance. Nevertheless it can be used within a quasi–maximumlikelihood setup to draw inference on the model parameters. In order to do that, this paper introduces a new methodology for deriving all cumulants of the returns and realised variance in explicit form by solving a recursive system of inhomogeneous ordinary differential equations.Download Info
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Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2008-57.Length: 41
Date of creation: 10 Nov 2008
Date of revision:
Handle: RePEc:aah:create:2008-57
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Web page: http://www.econ.au.dk/afn/
Related research
Keywords: Lévy processes; stochastic volatility; leverage effect; superposition; realised variance;Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-18 (All new papers)
- NEP-ECM-2008-11-18 (Econometrics)
References
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Almut E. D. Veraart & Luitgard A. M. Veraart, 2009.
"Stochastic volatility and stochastic leverage,"
CREATES Research Papers
2009-20, School of Economics and Management, University of Aarhus.
- Almut Veraart & Luitgard Veraart, 2012. "Stochastic volatility and stochastic leverage," Annals of Finance, Springer, vol. 8(2), pages 205-233, May.
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