Consistent Estimation of Integrated Volatility Using Intraday Absolute Returns for SV Jump Diffusion Processes
In this paper, we consider an integrated volatility estimation of a stochastic volatility jump diffusion model using intraday absolute returns. We introduce our estimator as a natural extension of realized absolute variation, proposed by Barndorff-Nielsen and Shephard (2003), and show its consistency and asymptotic normality. We also show our estimator is asymptotically more efficient than another jump-robust estimator, bi-power variation, proposed by Barndorff-Nielsen and Shephard (2004, 2006). The results of a simulation to assess the finite-sample behavior of our estimator compliment the asymptotic result.
Volume (Year): 32 (2012)
Issue (Month): 1 ()
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- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2007.
"Roughing It Up: Including Jump Components in the Measurement, Modeling and Forecasting of Return Volatility,"
CREATES Research Papers
2007-18, School of Economics and Management, University of Aarhus.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2007. "Roughing It Up: Including Jump Components in the Measurement, Modeling, and Forecasting of Return Volatility," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 701-720, November.
- Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2005. "Roughing it Up: Including Jump Components in the Measurement, Modeling and Forecasting of Return Volatility," NBER Working Papers 11775, National Bureau of Economic Research, Inc.
- Lars Forsberg & Eric Ghysels, 2007. "Why Do Absolute Returns Predict Volatility So Well?," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 5(1), pages 31-67.
- Vetter, Mathias & Podolskij, Mark, 2006.
"Estimation of Volatility Functionals in the Simultaneous Presence of Microstructure Noise and Jumps,"
2006,51, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
- Mark Podolskij & Mathias Vetter, 2007. "Estimation of Volatility Functionals in the Simultaneous Presence of Microstructure Noise and Jumps," CREATES Research Papers 2007-27, School of Economics and Management, University of Aarhus.
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