Calendar Time Sampling of High Frequency Financial Asset Price and the Verdict on Jumps
AbstractIn the current paper, we investigate the bias introduced through the calendar time sampling of the price process of financial assets. We analyze results from a Monte Carlo simulation which point to the conclusion that the multitude of jumps reported in the literature might be, to a large extent, an artifact of the bias introduced through the previous tick sampling scheme, used for the time homogenization the price series. We advocate the use of Akima cubic splines as an alternative to the popular previous tick method. Monte Carlo simulation results confirm the suitability of Akima cubic splines in high frequency applications and the advantages of these over other calendar time sampling schemes, such as the linear interpolation and the previous tick method. Empirical results from the FX market complement the analysis.
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Bibliographic InfoPaper provided by Central Bank of Cyprus in its series Working Papers with number 2010-7.
Length: 54 pages
Date of creation: Sep 2010
Date of revision:
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Web page: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=1
More information through EDIRC
Sampling schemes; previous tick method; quadratic variation; jumps; stochastic volatility; realized measures; high-frequency data;
Find related papers by JEL classification:
- C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: 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)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-23 (All new papers)
- NEP-ECM-2010-10-23 (Econometrics)
- NEP-ETS-2010-10-23 (Econometric Time Series)
- NEP-MST-2010-10-23 (Market Microstructure)
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