Department of Economics and Business Economics

Impact of time-inhomogeneous jumps and leverage type effects on returns and realised variances

Research output: Working paperResearch

  • School of Economics and Management
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.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages41
Publication statusPublished - 2008

    Research areas

  • Lévy processes, stochastic volatility, leverage effect, superposition, realised variance

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ID: 13198130