Department of Economics and Business Economics

Inference for the jump part of quadratic variation of Itô semimartingales

Research output: Working paperResearch

  • School of Economics and Management
Recent research has focused on modelling asset prices by Itô semimartingales. In such
a modelling framework, the quadratic variation consists of a continuous and a jump component.
This paper is about inference on the jump part of the quadratic variation, which can
be estimated by the difference of realised variance and realised multipower variation. The
main contribution of this paper is twofold. First, it provides a bivariate asymptotic limit
theory for realised variance and realised multipower variation in the presence of jumps.
Second, this paper presents new, consistent estimators for the jump part of the asymptotic
variance of the estimation bias. Eventually, this leads to a feasible asymptotic theory which
is applicable in practice. Finally, Monte Carlo studies reveal a good finite sample performance
of the proposed feasible limit theory.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages37
Publication statusPublished - 2008

    Research areas

  • Quadratic variation, Itô semimartingale, stochastic volatility, jumps, realised variance, realised multipower variation, high–frequency data

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ID: 10919579