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Power and bipower variation with stochastic volatility and jumps

Abstract:

This article shows that realized power variation and its extension, realized bipower variation, which we introduce here, are somewhat robust to rare jumps. We demonstrate that in special cases, realized bipower variation estimates integrated variance in stochastic volatility models, thus providing a model-free and consistent alternative to realized variance. Its robustness property means that if we have a stochastic volatility plus infrequent jumps process, then the difference between realize...

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Publication status:
Published
Peer review status:
Peer reviewed

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Publisher copy:
10.1093/jjfinec/nbh001

Authors


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Institution:
University of Aarhus
Department:
Department of Mathematical Sciences
Role:
Author
More by this author
Institution:
University of Oxford
Division:
SSD
Department:
Economics
Research group:
Econometrics
Oxford college:
Nuffield College
Role:
Author
Publisher:
Oxford University Press Publisher's website
Journal:
Journal of Financial Econometrics Journal website
Volume:
2
Issue:
1
Pages:
1-37
Publication date:
2004-01-01
DOI:
EISSN:
1479-8417
ISSN:
1479-8409
Language:
English
Keywords:
Subjects:
UUID:
uuid:f927c62c-1717-4a27-8518-d272b0459d85
Local pid:
ora:2070
Deposit date:
2008-06-13

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