Calendar Time Sampling of High Frequency Financial Asset Price and the Verdict on Jumps

Marina Theodosiou ()
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Marina Theodosiou: Central Bank of Cyprus

No 2010-7, Working Papers from Central Bank of Cyprus

Abstract: In the current paper, we investigate the bias introduced through the calendar time sampling of the price process of financial assets. We analyze results from a Monte Carlo simulation which point to the conclusion that the multitude of jumps reported in the literature might be, to a large extent, an artifact of the bias introduced through the previous tick sampling scheme, used for the time homogenization the price series. We advocate the use of Akima cubic splines as an alternative to the popular previous tick method. Monte Carlo simulation results confirm the suitability of Akima cubic splines in high frequency applications and the advantages of these over other calendar time sampling schemes, such as the linear interpolation and the previous tick method. Empirical results from the FX market complement the analysis.

Keywords: Sampling schemes; previous tick method; quadratic variation; jumps; stochastic volatility; realized measures; high-frequency data (search for similar items in EconPapers)
JEL-codes: C12 C14 C83 G10 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2010-09
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:cyb:wpaper:2010-7

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