Estimation and Testing in Models Containing Both Jump and Conditional Heteroscedasticity
In this paper, the authors develop a test for the hypothesis that a series (observed in discrete time) is generated by a diffusion process. This test is based on an overidentifying relation between variance and kurtosis parameters that holds for GARCH diffusions. The proposed test is not specific to a particular data frequency and clearly indicates the presence of jumps in dollar exchange rates. To assess the size and intensity of the jumps, the authors estimate a model containing both jumps and conditional heteroskedasticity.
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Volume (Year): 16 (1998)
Issue (Month): 2 (April)
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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.:
- Fred G M C Nieuwland & Willem F C Verschoor & Christian C P Wolff, 1990. "EMS Exchange Rates," CEPR Financial Markets Paper 0002, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
- Drost, Feike C & Nijman, Theo E, 1993.
"Temporal Aggregation of GARCH Processes,"
Econometric Society, vol. 61(4), pages 909-927, July.
- Drost, F.C. & Nijman, T.E., 1990. "Temporal Aggregation Of Garch Processes," Papers 9066, Tilburg - Center for Economic Research.
- Drost, F.C. & Nijman, T.E., 1992. "Temporal aggregation of GARCH processes," Discussion Paper 1992-40, Tilburg University, Center for Economic Research.
- Drost, F.C. & Nijman, T.E., 1992. "Temporal Aggregation of Garch Processes," Papers 9240, Tilburg - Center for Economic Research.
- Drost, F.C. & Nijman, T.E., 1990. "Temporal aggregation of GARCH processes," Discussion Paper 1990-66, Tilburg University, Center for Economic Research.
- Vlaar, Peter J G & Palm, Franz C, 1993. "The Message in Weekly Exchange Rates in the European Monetary System: Mean Reversion, Conditional Heteroscedasticity, and Jumps," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 351-360, July.
- Nelson, Daniel B., 1990. "ARCH models as diffusion approximations," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 7-38.
- Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
- Drost, F.C. & Nijman, T.E., 1993. "Temporal aggregation of GARCH processes," Other publications TiSEM 0642fb61-c7f4-4281-b484-4, Tilburg University, School of Economics and Management.
- Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
- Merton, Robert C., 1975. "Option pricing when underlying stock returns are discontinuous," Working papers 787-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Philippe Jorion, 1988. "On Jump Processes in the Foreign Exchange and Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 427-445.
- Amin, Kaushik I, 1993. " Jump Diffusion Option Valuation in Discrete Time," Journal of Finance, American Finance Association, vol. 48(5), pages 1833-1863, December.
- Beckers, Stan, 1981. "A Note on Estimating the Parameters of the Diffusion-Jump Model of Stock Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 16(01), pages 127-140, March.
- Ball, Clifford A & Torous, Walter N, 1985. " On Jumps in Common Stock Prices and Their Impact on Call Option Pricing," Journal of Finance, American Finance Association, vol. 40(1), pages 155-173, March.
- Amin, Kaushik I & Ng, Victor K, 1993. " Option Valuation with Systematic Stochastic Volatility," Journal of Finance, American Finance Association, vol. 48(3), pages 881-910, July.
- Naik, Vasanttilak, 1993. " Option Valuation and Hedging Strategies with Jumps in the Volatility of Asset Returns," Journal of Finance, American Finance Association, vol. 48(5), pages 1969-1984, December. Full references (including those not matched with items on IDEAS)
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