Estimation of Volatility Functionals in the Simultaneous Presence of Microstructure Noise and Jumps

Mark Podolskij () and Mathias Vetter ()
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Mathias Vetter: School of Economics and Management, University of Aarhus, Denmark and CREATES, Postal: 8000 Aarhus C, Denmark

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We propose a new concept of modulated bipower variation for diffusion models with microstructure noise. We show that this method provides simple estimates for such important quantities as integrated volatility or integrated quarticity. Under mild conditions the consistency of modulated bipower variation is proven. Under further assumptions we prove stable convergence of our estimates with the optimal rate n-1/4. Moreover, we construct estimates which are robust to finite activity jumps.

Keywords: Bipower Variation; Central Limit Theorem; Finite Activity Jumps; High-Frequency Data; Integrated Volatility; Microstructure Noise; Semimartingale Theory; Subsampling (search for similar items in EconPapers)
JEL-codes: C10 C13 C14 (search for similar items in EconPapers)
Pages: 35
Date: 2007-09-19
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2007-27

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