This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Power and bipower variation with stochastic volatility and jumps

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Ole E. Barndorff-Nielsen (The Centre for Mathematical Physics and Stochastics (MaPhySto). Univeristy of Aarhus, Denmark)
Neil Shephard () (Department of Economics, and Nuffield College, Oxford University)

Additional information is available for the following registered author(s):

Abstract

This paper shows that realised power variation and its extension we introduce here called realised bipower variation is somewhat robust to rare jumps. We show realised bipower variation estimates integrated variance in SV models --- thus providing a model free and consistent alternative to realised variance. Its robustness property means that if we have an SV plus infrequent jumps process then the difference between realised variance and realised bipower variation estimates the quadratic variation of the jump component. This seems to be the first method which can divide up quadratic variation into its continuous and jump components. Various extensions are given. Proofs of special cases of these results are given. Detailed mathematical results will be reported elsewhere.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nuff.ox.ac.uk/economics/papers/2003/W18/eric_may03.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2003-W17.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 33 pages
Date of creation: 15 Sep 2003
Date of revision:
Handle: RePEc:nuf:econwp:0318

Contact details of provider:
Web page: http://www.nuff.ox.ac.uk/economics/

For technical questions regarding this item, or to correct its listing, contact: (Catherine McNeill).

Related research
Keywords:

Other versions of this item:

This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chernov, Mikhail & Gallant, A. Ronald & Ghysels, Eric & Tauchen, George, 2002. "Alternative Models for Stock Price Dynamic," Working Papers 02-03, Duke University, Department of Economics. [Downloadable!]
    Other versions:
  2. Schwert, G William, 1989. " Why Does Stock Market Volatility Change over Time?," Journal of Finance, American Finance Association, vol. 44(5), pages 1115-53, December. [Downloadable!] (restricted)
    Other versions:
  3. Michael K Pitt & Neil Shephard, . "Filtering via simulation: auxiliary particle filters," Economics Papers 1997-W13, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
  4. Ole E. Barndorff-Nielsen & Neil Shephard, 2001. "Econometric Analysis of Realised Covariation: High Frequency Covariance, Regression and Correlation in Financial Economics," Economics Papers 2002-W13, Economics Group, Nuffield College, University of Oxford, revised 18 Mar 2002. [Downloadable!]
    Other versions:
  5. Ole E. Barndorff-Nielsen & Neil Shephard, 2001. "Non-Gaussian Ornstein-Uhlenbeck-based models and some of their uses in financial economics," Journal Of The Royal Statistical Society Series B, Royal Statistical Society, vol. 63(2), pages 167-241. [Downloadable!] (restricted)
  6. Jeannette H.C. Woerner, 2002. "Variational Sums and Power Variation: a unifying approach to model selection and estimation in semimartingale models," OFRC Working Papers Series 2002mf05, Oxford Financial Research Centre. [Downloadable!]
  7. Neil Shephard, 2005. "Stochastic Volatility," Economics Papers 2005-W17, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
  8. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March. [Downloadable!] (restricted)
  9. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 1999. "The Distribution of Exchange Rate Volatility," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-059, New York University, Leonard N. Stern School of Business-. [Downloadable!]
    Other versions:
  10. Ole E. Barndorff-Nielsen & Neil Shephard, 2003. "Impact of jumps on returns and realised variances: econometric analysis of time-deformed Levy processes," Economics Papers 2003-W12, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
    Other versions:
  11. Poterba, James M & Summers, Lawrence H, 1986. "The Persistence of Volatility and Stock Market Fluctuations," American Economic Review, American Economic Association, vol. 76(5), pages 1142-51, December. [Downloadable!] (restricted)
    Other versions:
  12. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 2003. "Modeling and Forecasting Realized Volatility," Econometrica, Econometric Society, vol. 71(2), pages 579-625, March. [Downloadable!] (restricted)
    Other versions:
  13. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144. [Downloadable!] (restricted)
    Other versions:
  14. Ghysels, E. & Harvey, A. & Renault, E., 1996. "Stochastic Volatility," Cahiers de recherche 9613, Universite de Montreal, Departement de sciences economiques. [Downloadable!]
    Other versions:
  15. Ole E. Barndorff-Nielsen & Neil Shephard, 2002. "Power Variation and Time Change," Economics Papers 2002-W24, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
  16. John M. Maheu & Thomas H. McCurdy, 2004. "News Arrival, Jump Dynamics, and Volatility Components for Individual Stock Returns," Journal of Finance, American Finance Association, vol. 59(2), pages 755-793, 04. [Downloadable!] (restricted)
    Other versions:
  17. Kim, Sangjoon & Shephard, Neil & Chib, Siddhartha, 1998. "Stochastic Volatility: Likelihood Inference and Comparison with ARCH Models," Review of Economic Studies, Blackwell Publishing, vol. 65(3), pages 361-93, July. [Downloadable!] (restricted)
    Other versions:
  18. Elena Andreou & Eric Ghysels, 2004. "The Impact of Sampling Frequency and Volatility Estimators on Change-Point Tests," CIRANO Working Papers 2004s-25, CIRANO. [Downloadable!]
  19. Harvey, Andrew & Ruiz, Esther & Shephard, Neil, 1994. "Multivariate Stochastic Variance Models," Review of Economic Studies, Blackwell Publishing, vol. 61(2), pages 247-64, April. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ole E. Barndorff-Nielsen & Neil Shephard, 2003. "Econometrics of testing for jumps in financial economics using bipower variation," Economics Papers 2003-W21, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
    Other versions:
  2. Ole E. Barndorff-Nielsen & Sven Erik Graversen & Jean Jacod & Neil Shephard, 2005. "Limit theorems for bipower variation in financial econometrics," OFRC Working Papers Series 2005fe09, Oxford Financial Research Centre. [Downloadable!]
    Other versions:
  3. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold,, 2003. "Some Like it Smooth, and Some Like it Rough: Untangling Continuous and Jump Components in Measuring, Modeling, and Forecasting Asset Return Volatility," CFS Working Paper Series 2003/35, Center for Financial Studies. [Downloadable!]
    Other versions:
  4. Ole E. Barndorff-Nielsen & Svend Erik Graversen & Neil Shephard, 2003. "Power variation & stochastic volatility: a review and some new results," Economics Papers 2003-W19, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
  5. Ole E. Barndorff-Nielsen & Neil Shephard & Matthias Winkel, 2005. "Limit theorems for multipower variation in the presence of jumps," OFRC Working Papers Series 2005fe06, Oxford Financial Research Centre. [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? A tutorial is available.

This page was last updated on 2008-11-3.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.