Estimation of Jump Tails

Tim Bollerslev and Viktor Todorov ()
Additional contact information
Viktor Todorov: Department of Finance, Kellogg School of Management, Northwestern University, Postal: Evanston, IL 60208, USA

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

Abstract: We propose a new and flexible non-parametric framework for estimating the jump tails of Itô semimartingale processes. The approach is based on a relatively simple-to-implement set of estimating equations associated with the compensator for the jump measure, or its "intensity", that only utilizes the weak assumption of regular variation in the jump tails, along with in-fill asymptotic arguments for uniquely identifying the "large" jumps from the data. The estimation allows for very general dynamic dependencies in the jump tails, and does not restrict the continuous part of the process and the temporal variation in the stochastic volatility. On implementing the new estimation procedure with actual high-frequency data for the S&P 500 aggregate market portfolio, we find strong evidence for richer and more complex dynamic dependencies in the jump tails than hitherto entertained in the literature.

Keywords: Extreme events; jumps; high-frequency data; jump tails; non-parametric estimation; stochastic volatility (search for similar items in EconPapers)
JEL-codes: C13 C14 G10 G12 (search for similar items in EconPapers)
Pages: 47
Date: 2010-04-14
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:

Downloads: (external link)
https://repec.econ.au.dk/repec/creates/rp/10/rp10_16.pdf (application/pdf)

Related works:
Journal Article: Estimation of Jump Tails (2011)
Working Paper: Estimation of Jump Tails (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2010-16

Access Statistics for this paper

More papers in CREATES Research Papers from Department of Economics and Business Economics, Aarhus University
Bibliographic data for series maintained by ().